The Center for Public Integrity and The Associated Press analyzed financial disclosure reports from 6,933 state legislators around the country and found that three out of four lawmakers had income from other employment.

While such outside employment gives lawmakers expertise in certain policy areas, it also provides an opening for potential conflicts of interest. Lawmakers’ businesses and the industries they work in can be directly affected by the actions of the legislatures. The reporting unearthed numerous examples of state lawmakers who have introduced and supported legislation that directly or indirectly helps their own businesses, their employers or their personal finances.

Even then, their actions do not necessarily represent a conflict of interest as defined by state legislatures. Legislatures set their own rules about what constitutes a conflict and at what point lawmakers should recuse themselves from a vote.

What are financial disclosure reports and why do they matter?

Personal financial disclosure reports are intended to help the public understand where and how government officials get their income, and whether any of those ties present conflicts of interest with their political work.

These disclosures are especially important for state lawmakers. Unlike many other elected officials, legislators across the country often hold other jobs and run businesses when legislatures are not in session. The AP and Center for Public Integrity review found that at least 76 percent of state lawmakers holding office in 2015 worked outside jobs.

That’s different than in Congress, where moonlighting by members has been sharply restricted since 1978.

Only three states — Michigan, Idaho and Vermont — have not required such reports. In June, though, Vermont announced that it will begin requiring them in 2018.

What kinds of jobs do legislators hold outside of their political office?

State legislators work all kinds of jobs and sometimes more than one. Lawyers and those with ties to real estate tend to dominate, but some legislators also drive taxis, wait tables, own cemeteries, judge boxing matches, play guitar in rock bands or deal in rare coins.

Such outside employment gives lawmakers expertise in certain policy areas, but many of those jobs are directly affected by the actions of the legislatures. That can create conflicts of interest.  

How can I learn more about my legislator’s financial ties?

Out of the 47 states that require personal financial disclosures, the completed forms are available online in 31 states. In the remaining 16 states, those who want to view the reports might need to email a clerk or take more complicated steps such as showing their photo IDs or requesting the documents in person.

The Center for Public Integrity has made it easier by putting disclosures from a total of 6,933 lawmakers in 47 states who held office in 2015 into a searchable digital library. Here's where you can find your legislators.

How often do legislators update their reports?

In most states, the reports are filed annually. But in North Dakota, disclosures are required only in election years.

North Carolina and Colorado require lawmakers to file initial reports that detail their employment and investments. Each subsequent year, though, they can file a form stating only that nothing has changed since the prior report. In these two states, you might have to collect multiple years’ reports if you want to get a complete view of your lawmaker’s disclosure. We have gathered those older files in our disclosure library.

What do the disclosures contain? 

Some states ask lawmakers to detail the jobs of their spouses or children, their businesses, investments, real estate holdings or even ties to lobbyists. Others ask for little beyond the legislators’ sources of income.

New Hampshire’s form contains only two sections: a checklist to declare if legislators believe they have a conflict in certain areas; and a space to declare sources of income over $10,000. 

On the Wyoming form, in addition to questions about income sources, two checkboxes ask whether the filer has any real estate or security holdings. But the lawmaker does not have to provide additional details on which stocks or where the real estate is located. 

Can legislators vote on an issue when they have ties to it?

It depends on the state. In every state except Oregon and Utah, legislators can abstain or ask to be recused from voting on legislation. Most states specify that they should do so if the legislation presents a conflict of interest. 

But many lawmakers are still allowed to debate, and sometimes even vote, on legislation and amendments that may personally benefit them or their companies. For example, Louisiana allows lawmakers to debate bills that benefit a personal or financial interest even after they have recused themselves, while California lawmakers can vote on legislation even after declaring conflicts of interest if their votes are “fair and objective.” 

In the Idaho Senate and the Kansas House, legislators need two-thirds of the chamber’s permission to abstain. 

Oregon and Utah require lawmakers to vote if they are present, regardless of any potential conflicts of interest. Many legislators say frequent abstentions would keep their chambers from working properly.

This story was co-published with The Associated Press.

READ MORE: 

Conflicted Interests: State lawmakers often blur the line between public's business and their own

Find your state legislators' financial interests

How we investigated conflicted interests in statehouses across the country

A recent change in Iowa’s tax code spared Mark Chelgren’s machine shop, welding company and wheelchair-parts plant from paying sales tax when buying certain supplies such as saws and cutting fluid.

The change passed by the state Legislature last year wasn’t just good for Chelgren’s businesses. It was brought about in part by Chelgren himself. The Iowa state senator championed the tax break for manufacturing purchases as part of his work at the Statehouse in Des Moines.

Chelgren isn’t the only state lawmaker doing his outside interests a favor. A North Dakota legislator was instrumental in approving millions of dollars for colleges that also are customers of his insurance business. A Nevada senator cast multiple votes that benefited clients of the lobbying firm where he works. Two Hawaii lawmakers involved with the condominium industry sponsored and voted for legislation smoothing the legal speed bumps their companies navigate. And the list goes on.

State lawmakers around the country have introduced and supported policies that directly and indirectly help their own businesses, their employers and sometimes their personal finances, according to an analysis of disclosure forms and legislative votes by the Center for Public Integrity and The Associated Press.

The news organizations found numerous examples in which lawmakers’ votes had the effect of promoting their private interests. Even then, the votes did not necessarily represent a conflict of interest as defined by the state. That’s because legislatures set their own rules for when lawmakers should recuse themselves. In some states, lawmakers are required to vote despite any ethical dilemmas.

Many lawmakers defend even the votes that benefit their businesses or industries, saying they bring important expertise to the debate.

Chelgren said the Iowa tax changes were good policy and that his background running a manufacturing business was a valuable perspective in the Statehouse.

"We have way too many people who have been in government their whole lives and don’t know how to make sure that a payroll is met," the Republican said. He said the tax change had only a negligible effect on his business, saving it a few hundred dollars a year.

Iowa Senate rules say lawmakers should consider stepping aside when they have conflicts if their participation would erode public confidence in the Legislature. That’s a step one local official said Chelgren should have taken, especially since the tax change costs the state tens of millions a year in revenue.

“We have to keep the public’s trust,” said Jerry Parker, the Democratic chairman of the Wapello County Board of Supervisors in Chelgren’s district. “If they see us benefiting financially from votes that we make, the perception is bad for all elected officials.”

Citizen Legislatures

There’s no shortage of support for the “citizen legislature” concept that operates in most statehouses — that lawmakers should not be professional politicians, but instead ordinary citizens with day jobs. The idea is that those lawmakers can better relate to the concerns of their constituents and bring real-world experience to making policy.

Forty states have governing bodies that the National Conference of State Legislatures considers less than full-time. Those lawmakers convene for only part of the year and rely on other work to make a living.

To assess lawmakers’ outside employment, the Center for Public Integrity analyzed disclosure reports from 6,933 lawmakers holding office in 2015 from the 47 states that required them. Most legislators reported outside work except in California and New York, where the office is considered full-time and pays relatively high salaries — $104,118 and $79,500 per year, respectively.

The Center found that at least 76 percent of state lawmakers nationwide reported outside income or employment. Many of those sources are directly affected by the actions of the legislatures. By comparison, members of Congress have faced sharp restrictions on moonlighting since 1978.

The financial information lawmakers disclose about outside work varies widely from state to state. In Illinois, the disclosure forms are derisively labeled “none sheets” for the answer that invariably follows most questions about economic interests and potential conflicts. Idaho, Michigan and Vermont do not require lawmakers to disclose their financial interests. Vermont passed a law this year to do so starting in 2018.

Ethics rules often allow members to participate in debates and even vote when they have a potential conflict. Recusal is frequently up to the lawmaker.

Pennsylvania lawmakers who believe they may have a conflict of interest are required to ask their chamber’s presiding officer whether they should vote. In 30 instances in the Senate over a recent three-year period, every inquiry received the green light. One senator was approved to vote for his own mother’s nomination to a public board. 

Two states, Utah and Oregon, require lawmakers to vote even if they have a conflict. California lawmakers can vote on legislation even after declaring a conflict of interest if they believe their votes are “fair and objective.” Many legislators say frequent abstentions would keep their chambers from working properly.

“We all bring to the table what we know, what our jobs are,” said Nevada Sen. Tick Segerblom, a Democrat. “When you have a citizen legislature, there’s nobody you can find, just pull someone off a street, who at the end of the day wouldn't have some type of conflict.”
 

Muddied Motivations

Another Nevada lawmaker, Republican Sen. Ben Kieckhefer, voted at least six times this year to advance measures benefiting clients of the law firm where he works as director of client relations. In one case, he voted for a bill in committee that would have sped up a sales tax break for medical equipment, a measure backed by a client of his firm. At a hearing, he even asked questions of the lobbyist, a partner at his firm, with no mention of their association. The bill did not pass the full Legislature.

And last year, while his firm, McDonald Carano, was lobbying on behalf of the Oakland Raiders, Kieckhefer voted to approve $750 million in taxes to help build a stadium that would serve as the team’s new home in Las Vegas.

Kieckhefer, a former Associated Press reporter, said a firewall divides his firm’s lobbying from its legal work, the division where he works. He defended Nevada’s citizen legislature, which meets every other year and pays lawmakers $288.29 for every day of the session.

“I'm not reliant on support from lobbyists or special interests to keep the job I have to support my family,” he said.

Nevada law says that if legislators feel they have conflicts of interest, they must disclose them before voting. But for the Raiders stadium decision, Kieckhefer had no need to speak up: The Senate, in a historically unprecedented move, waived the normal conflict-of-interest provisions for the vote, a priority for Republican Gov. Brian Sandoval and wealthy casino magnate and political donor Sheldon Adelson, who later pulled out of financing part of the deal. The bill passed.

Ethics rules are some of many government policies that state legislatures get to write for themselves. Many, for instance, exempt their members from open records and meetings laws that apply to other agencies.

Some states are working to strengthen measures that would prevent conflicts of interest. Ballot initiatives for 2018 are underway in Alaska and South Dakota.

Maryland passed ethics reforms this year after the House of Delegates unanimously reprimanded Democratic Del. Dan Morhaim for acting “contrary to the principles” of Maryland’s ethical standards by not disclosing his work as a paid consultant for a marijuana company while he was working on marijuana policy.

“I have been clear from the beginning of this episode that I have done nothing wrong,” Morhaim said in an email. “The reprimand issued was for not following the ‘intent’ of the rules, a wholly new and undefined standard.”

Double Duty

In Hawaii, where condo owners say they feel outgunned at the Statehouse, Rep. Linda Ichiyama and Sen. Michelle Kidani, both Democrats, sponsored and voted for bills this year that their employers in condominium management had championed. Ichiyama is an attorney for a law firm that represents condo associations while Kidani works for a company that manages condominiums. The bills included a provision that critics say makes it easier for condo board members to re-elect themselves.

Then-House Speaker Joe Souki ruled Ichiyama had no conflicts and could vote, and Senate President Ron Kouchi said he did not remember ruling on any conflicts related to Kidani this session. Ichiyama did not return repeated phone calls or emails seeking comment.

“I follow the rules of the Senate, including voting on bills that may relate to my non-legislative employment,” Kidani said in an email. “Proposed bills are carefully read in order to determine whether there may be any conflict of interests raised.”

Other lawmakers have used public office to polish their day-job credentials. Rhode Island Sen. Stephen Archambault, a Democrat, has advertised his legislative work as a reason to hire him as a defense attorney in drunken driving cases: “Archambault literally wrote this law, and knows exactly what to do to succeed for you,” his law office website read until contacted by a reporter this fall. He did not return requests for comment.

In North Dakota, state Rep. Jim Kasper sponsored bills over the past decade that have provided millions in extra funding to the state’s five tribal colleges, whose operations are usually funded by the federal government.

Kasper, a Republican who owns a company that coordinates insurance benefits, has counted two of the colleges among the hundreds of clients he has had over the years. One has been his customer for nearly three decades.

He said he sponsored the bills because he cares about addressing unemployment near Native American reservations.

"Nothing was hidden,” he said. “I wouldn't have done it if I didn't feel it was the right thing to do.”

Lawmakers don’t always choose to cast votes that benefit their private interests. West Virginia Senate President Mitch Carmichael, a Republican, voted for a bill this year to expand broadband internet competition that his company, Frontier Communications, lobbied against.

Within days, Frontier fired him, though it denies it was because of his vote. Spokesman Andy Malinoski said in an email that “market and economic conditions” led the company to eliminate several positions, including Carmichael’s. 

Carmichael said citizen legislators frequently feel pressure from outside income sources but usually do the right thing.

“We often feel the influences of employment,” he said. “In my case, the net result is that I lost my job.”

Contributors include David Jordan and Joe Yerardi of the Center for Public Integrity; and Associated Press reporters James MacPherson in Bismarck, North Dakota, Audrey McAvoy in Honolulu, John O'Connor in Springfield, Illinois, Mark Scolforo in Harrisburg, Pennsylvania, Scott Sonner in Reno, Nevada, and Brian Witte in Annapolis, Maryland.

This story was co-published with The Associated Press.

READ MORE

Find your state legislators' financial interests

Q&A: What we learned from digging into state legislators' disclosure forms

How we investigated conflicted interests in statehouses across the country

Former White House Chief Strategist Stephen K. Bannon has disclosed the source of $2 million in debt, which he previously failed to report, on a revised government document released Tuesday.

The corrected disclosure follows a Center for Public Integrity investigation in July that revealed Bannon’s omission.

As a senior government employee, Bannon was required to disclose personal, financial liabilities. He listed four mortgages on rental properties but failed to specify the creditors, describing them as “HOME LOAN #1,” “HOME LOAN #2,” “HOME LOAN #3” and “HOME LOAN #4.”

The Center for Public Integrity used public records to report the source of three of the debts as JPMorgan Chase — a government contractor and powerful political force— and the fourth as Quicken Loans. The revised filing for Bannon, who Trumpfired in August, officially confirms this.

The Center for Public Integrity discovered Bannon’s omission as part of #CitizenSleuth, a joint reporting project with Reveal from the Center for Investigative Reporting that asked the public help identify errors or potential conflicts of interest contained within top government officials’ personal financial disclosures.

The White House promised to correct Bannon’s disclosure following the Center for Public Integrity’s report in July. But the White House didn’t release Bannon’s amended document until this week.

The White House did not immediately respond to questions about Bannon’s new disclosure.

Bannon could not immediately be reached for comment. Reached by phone Wednesday afternoon, Arthur Schwartz, a Bannon spokesman, said he'd attempt to reach Bannon.

Bannon’s newest disclosure document is a product of several previous iterations: it’s been edited on seven separate occasions from May to October to add or clarify a handful of items, including formal disclosure of Bannon’s role as CEO of Trump’s campaign.

Bannon’s newest disclosure offered a few new, if minor, details about his ties to businesses backed by conservative billionaire Robert Mercer. Those businesses include Cambridge Analytica (a voter targeting operation Bannon now reports as providing “data analysis”) and several limited liability companies involved in making movies advancing nationalist causes, such as fighting militant Islam and defeating liberal politicians, including 2016 Democratic presidential nominee Hillary Clinton (now reported as “film industry”).

The correction comes amid a series of reported lapses on the disclosures of senior executive branch officials, including more than 70 financial holdings left off the public disclosure of White House Senior Adviser and presidential son-in-law Jared Kushner.

The New York Timesreported Kushner also omitted contacts with Russian officials on a separate, non-public form submitted as part of a background check. McClatchy reported last month that disclosures several former Trump administration officials, including Bannon, must file upon exiting government had not yet been released.

In Bannon’s case, White House ethics officials approved the form with missing information, raising questions about the ability of senior officials to skirt disclosure requirements.

"Individuals make mistakes,” Kathleen Clark, a professor of law at Washington University in St. Louis and an expert on government ethics, said in July. “The real story is how shoddy the ethics process is in the White House.”

READ MORE:

Become a #CitizenSleuth and uncover Trump administration mysteries

White House spotlight: Tracking Donald Trump

Commerce Secretary Wilbur Ross sells shipping investment

Conservative nonprofit 60 Plus Association is violating federal law by “willfully” refusing to pay a fine for previous election season transgressions, a nonpartisan watchdog alleges in a new complaint to the Federal Election Commission.

Citizens for Responsibility and Ethics in Washington is asking FEC officials to further investigate the matter and force the 60 Plus Association to pay the fine by suing the group in federal court.

The new complaint follows an Oct. 30 investigation by the Center for Public Integrity that revealed how more than 160 political committees and similar groups — including the 60 Plus Association, which owes taxpayers $45,000 — have failed to address political campaign-related penalties they promised to pay.

In some cases, the committees’ unpaid fines have lingered for years, in part because the FEC and U.S. Treasury’s Bureau of the Fiscal Service generally stop pursuing political scofflaws that categorically ignore their debt collection efforts.

Citizens for Responsibility and Ethics in Washington filed a complaint against the 60 Plus Association in 2014. This original complaint led the FEC, in July 2016, to fine the Virginia-based 60 Plus Association $50,000 for not disclosing its donors in violation of federal election law.

In October, 60 Plus Association President Jim Martin told the Center for Public Integrity that former President Amy Frederick agreed to pay the FEC’s fine without obtaining the approval of the association’s board of directors. It last year paid $5,000 of the $50,000 it owed “on advice of counsel,” Martin said.

But the 60 Plus Association board then “decided to contest the remainder of the unprecedented large fine given the situation …We continue to work with Treasury and FEC on this matter,” he said.

The 60 Plus Association describes itself as “a non-partisan seniors advocacy group with a free enterprise, less government, less taxes approach.”

Citizens for Responsibility and Ethics in Washington’s complaint states that the 60 Plus Association is in “clear violation” of its July 2016 agreement to pay the FEC the full $50,000 it owes.

And the FEC needs to be more aggressive with the 60 Plus Association, Citizens for Responsibility and Ethics in Washington spokesman Jordan Libowitz said.

“Too often, the FEC needs external motivation to take action … it should act and act quickly,” Libowitz said.

During the 2016 election cycle, the 60 Plus Association spent about $122,000 on advertisements boosting 14 Republican political candidates, according to Federal Election Commission records analyzed by the Center for Responsive Politics.

Among them: President Donald Trump, who benefitted from about $34,000 worth of 60 Plus Association promotions featuring entertainer Pat Boone, the organization’s national spokesman.

On Friday the 13th of June 2014, a scientist in a bioterrorism research laboratory at the Centers for Disease Control and Prevention in Atlanta noticed something unsettling. An unexpected growth appeared on a plate that supposedly held an inactivated form of the deadly anthrax bacteria.

More worrisome still, the plate was part of a larger sample — but the rest of that sample had already been removed and taken to another CDC lab that wasn’t equipped for experiments on pathogens as easily spread as live anthrax. Unaware that the sample might be live, a scientist there had already begun working with it, first using a nitrogen air stream to clean flakes off the plate holding it — a process that could transform the anthrax sample into an airborne threat.

By the time the CDC realized a live anthrax sample had been moved around its campus, sent to a low-security lab, handled by unknowing scientists, and maybe even aerosolized, a week had passed. At first, just two CDC employees were sent for testing. But officials then discovered workers had come and gone from restricted areas without being accurately recorded, and in the end 81 people had to be medically monitored.

Ultimately, no one was infected. But a recent audit by the investigative arm of Congress makes clear that porous government oversight played a part in the incident, and concludes that the problems that enabled the breach to take place haven’t been fixed.

Safety, the agency found, was compromised by an inherent conflict of interest: Key federal agencies such as the CDC that work with deadly pathogens and toxins, including Ebola, bird flu, smallpox, bubonic plague and ricin, determine for themselves whether that work is being done safely, without any independent oversight.

Instead, oversight is conducted through the so-called Federal Select Agent Program, in which the CDC and the Agriculture Department conduct inspections based on the rules they decide for themselves, and set standards they must meet at their own financial expense. The inspectors are not, an October report by the Government Accountability Office noted, “structurally distinct and separate from all the labs they oversee.”

Moreover, the lead federal inspection agency — the CDC — itself has accumulated the largest number of rules violations, according to a lawmaker's account of information provided to Congress in 2015.

Along with other flaws, these shortcomings render oversight “duplicative, fragmented, and dependent on self-policing,” the GAO report said. America’s approach, the report added, isn’t as hardy as some of its international allies, which also conduct sensitive work on deadly pathogens, but have assigned independent regulators to oversee it.

Speaking at a Nov. 2 hearing of the House Energy and Commerce Committee subcommittee on oversight and investigation, Rep. Diana DeGette, D-Colo., said that “we can’t just keep stumbling along like this from year to year.” Unless the Select Agent program is reformed, she said, “at some point, something very bad is going to happen.”

Asked for comment, CDC spokesman Jason McDonald said, “We believe that we are fulfilling the mandate given to us by Congress,” but added that “there is always room for process improvement.”

‘A serious event’ 

An internal review by the CDC in July 2014 called the previous month’s anthrax scare “a serious event that should not have happened.” The CDC also promised concrete actions “to change processes that allowed this to happen” and said the agency “will do everything possible to prevent a future occurrence such as this in any CDC laboratory, and to apply the lessons learned to other laboratories across the United States.” 

The next year, however, an Army lab in Utah sent live anthrax to laboratories in all 50 states, nine countries, three U.S. territories, and Washington, D.C. A year after that, the Department of Homeland Security discovered that instead of an inert form of ricin — another deadly biological agent — one of its own labs had been sending active, lethal poison to a Federal Emergency Management Agency training center since 2011. As a result, as many as 10,000 trainees worked with a toxin that could have killed them in tiny doses. Near-catastrophic mistakes persisted in other labs monitored by the Select Agent program.

Rep. Morgan Griffith, R-Va., a member of the House Energy and Commerce Committee, said at the Nov. 2 subcommittee hearing about the inspection effort that its repeated glitches had an air of “Wash. Rinse. Repeat.”

“One would have assumed that the oversight program for Select Agents would meet at least some of the oversight elements found at other government oversight programs for dangerous research,” Griffith said. “That is not the case.”

Under the Select Agent program, labs affiliated with the government, universities and private industry that intend to work with more than 60 dangerous biological agents and toxins must secure a license and submit to federal inspections. Licenses issued to labs multiplied quickly after 9/11, according to the GAO, and as of December 2016, 336 such institutions employing at least 4,000 workers – including some with multiple labs — were registered.

Of those, 229 entities were eligible to possess the most dangerous Select Agent categories. But the executive branch doesn’t release detailed reports about how carefully each of the entities conducts its work.

For example, it told Congress in a special report that in 2016, there were 177 separate safety incidents involving potential exposures of nearly 1,000 lab workers. Three entities had their licenses suspended after inspections and one had its license suspended after authorities reviewed a confidential complaint. Five more entities were ordered to enter a "corrective action program" because they had problems decontaminating wastes, kept inaccurate records, or failed to follow workplace safety rules. But the names of these entities have not been made public.  

The United Kingdom, in contrast, posts enforcement actions and prosecutions online.

A question of structure

Both CDC and the USDA run their own specialized Select Agent labs, which means the two agencies play a role in their own inspections. What the GAO judged to be a lack of independence, however, the agencies see as an advantage. A USDA spokeswoman, Joelle Hayden said it “allows for swift response when needed.” And CDC spokesman McDonald said the expertise of the agencies “provides inspectors and other staff the unique ability to easily reach across each agency for technical assistance from subject matter experts."

But the GAO has repeatedly warned that the lack of outside scrutiny creates a conflict of interest. So the two agencies agreed several years ago that each would inspect the other’s labs. But the agreement was made in a memo; no checks are in place to ensure they fulfill that promise, and often, the GAO report said, they don’t. USDA inspectors sometimes feel they’re unqualified to deal with agents that affect humans, and commonly rely on CDC inspectors’ expertise while looking at CDC labs, while the USDA plays a similar advisory role during inspections of its own labs, the report said.

The GAO’s Chief Scientist, Timothy Persons, a nuclear physicist with a doctorate in biomedical engineering who directed the GAO report, said in an interview that he’s worried the two agencies are not independent enough “to move ahead with enforcement when they need to... It’s not like you can be an operator last week, a regulator this week, and go back to being an operator next week.”

Although the Select Agent program has taken some steps to reduce conflicts of interest, the report said, “it has generally done so in response to concerns raised by others. The program itself has not formally assessed all potential risks posed by its current structure and the effectiveness of its mechanisms to address those risks.”

The report also cited other serious problems in the Select Agent program, including “shortcomings related to each of the five key elements: independence, performing reviews, technical expertise, transparency, and enforcement.”

A staffing and training shortage leads to overworked and underqualified employees, who wind up with exhausting and time-consuming travel routines, the report said. A backlog of inspections and reports ensues, and leads to staffers performing functions they’re unqualified for, such as a security specialist inspecting a ventilation system vital to the containment of dangerous agents.

An Oct. 2015 internal report by the CDC’s office of public health preparedness and response expressed similar concerns. It also recommended more transparency, including allowing public access to inspection records.

But neither the CDC nor the USDA have adopted that practice, according to the GAO. They won’t even disclose the location of all the high containment labs, due to a 2002 bioterrorism law they say prohibits them from doing so.

Alternative approaches

Persons of the GAO noted that other government agencies have effective pathways for learning about missteps that the Select Agent laboratory system does not, and should adopt. The Federal Aviation Administration, in conjunction with NASA, has a confidential, voluntary “Aviation Safety Reporting System” and the Nuclear Regulatory Commission has a “Hotline” program, which provides a confidential way to inform the Commission’s Inspector General about safety problems.

Unlike the U.S. government, which worries primarily about security lapses at high-containment research labs, both Canada and the UK prioritize their inspections labs based on safety risks: The more dangerous the agent a lab wants to work with, the more frequent the visits from regulators, and the shorter its operating licenses will be. The GAO recommended the two U.S. agencies adopt similar practices; the agencies say they are already moving in that direction. But Persons says it’s evident from the persistent mistakes that they haven’t done it well enough.

Although the CDC and the USDA said in their formal responses to the GAO that its recommendations were generally sound, the heads of the Select Agent program at CDC, Samuel Edwin, and USDA veterinarian Freeda Isaac, struck a more defensive tone at the Nov. 2 hearing. “We are committed to further strengthening oversight of laboratories that handle select agents and toxins,” Edwin said, but he defended CDC’s existing role as the lead overseer.

Isaac didn’t appear to consider the shortcomings urgent. “We are,” she said, “pursuing an option to have an external review of our program” that would identify the most serious safety risks and “develop options to be able to take care of that.”

Griffith and other members of the congressional subcommittee are mulling what to do next about the Select Agent Program, Griffith’s spokesman Kevin Bair said in an email. “Independent oversight at the agencies, more transparency, and better coordination among those charged with the Select Agent Program would have helped the labs to focus more on priorities such as… inactivation of dangerous pathogens,” Griffith said.  

Lisa Cohen, chief of staff for DeGette, the ranking Democrat on the subcommittee, said that one of the core issues is that “with the dual agencies reviewing this, nobody has full responsibility or ownership.” The only way to change that and make it an independent agency is through legislation. “If they can’t get their act together,” Cohen said, DeGette “may support legislation to do that.”

Meanwhile, according to lawmakers and federal auditors, there’s never been a public accounting of how many laboratories are actually necessary to meet U.S. defense and public health needs, nor has an entity been identified to perform such an audit.  Which means that in facilitating research ostensibly necessary to keep Americans safe, the spread of biocontainment laboratories across the country — still subject to error and lacking in effective oversight — may be doing the opposite.

This story was produced in collaboration with StateImpact Pennsylvania.

7:42 p.m.: This story has been updated to add that a stay on a Millenium Valley pipeline was lifted by a federal court on Dec. 7, 2017. 

WAWAYANDA, N.Y. — In 2014, Gov. Andrew Cuomo made a bold statement by banning hydraulic fracturing in the Empire State, declaring alongside his health commissioner that “no child should live near” a shale-gas well because of its potential harm.

The governor’s proclamation made him a hero among environmentalists and persona non grata in the oil and gas industry. Energy in Depth, an industry-funded website, criticized Cuomo for basing the moratorium on dubious science “to kowtow to Yoko Ono, Mark Ruffalo, and all of the environmental pressure groups in New York.”

In truth, though, the picture is murkier, and Cuomo’s ban is less than absolute. Moratorium notwithstanding, New York is still reaping the rewards of fracking, importing shale gas from neighboring Pennsylvania and preparing to process it in a mammoth power plant under construction 65 miles northwest of New York City.

“It goes to the heart of the apparent irony that New York State would say, ‘No shale gas coming out,’ but we’re allowing any amount of shale gas into the state,” said Anthony Ingraffea, an engineer at Cornell University whose work has tied fracking to various environmental ills, including climate change. By his calculations, drillers outside the state would have to tap 130 wells each year, on average, to supply the plant with enough gas to operate. That translates into thousands of fracked wells over the 40-year lifetime typical for such a facility.

“I’m using the polite word ‘irony,’” Ingraffea said. “I could also use the impolite word ‘hypocrisy.’”

A mass of panels and tanks, the 650-megawatt CPV Valley Energy Center is rising in this town of 7,000 people in the wooded hills of Orange County. Its 275-foot stacks tower above apple orchards and dairy farms.

The plant, a $900 million project of the Maryland energy company Competitive Power Ventures, stands at a nexus of new and expanding gas infrastructure here — much of it fed by fracking. Seven miles south, a compressor station that pumps gas to keep it moving squats amid houses. To the west, a pipeline stretches toward the Marcellus Shale fields in Pennsylvania. Construction on another one could begin soon pending a court order.

The CPV plant, scheduled to go into service in early 2018, represents the leading edge of a broader trend in New York. It’s the first of two gas-fired power plants approved in the Hudson Valley. These plants, and 11 more that may come online across the state by 2020, collectively would add 5,708 megawatts of capacity to an electricity grid already fueled 57 percent by gas. New York has a surplus of gas-generated capacity. Statewide, the demand for electric power has grown, on average, only .23 percent per year since 2004.

The gas boom comes at a time when the Cuomo administration is undertaking a major clean-energy initiative. The governor unveiled the plan in 2015, calling it a roadmap for “a clean, resilient, and affordable energy system.” His administration has vowed to double the amount of electricity generated by solar, wind and other renewable sources — to 50 percent, from the current 24 percent — while reducing greenhouse-gas emissions 40 percent below 1990 levels by 2030 — an aggressive target. Last year, a Cuomo press release described climate change as “a very real threat that continues to grow by the day.”

New gas plants would work against the state’s clean-energy goals, said Eleanor Stein, a former administrative law judge at the New York Public Service Commission who managed the initiative from 2014 to 2015. That plan may not prohibit new gas plants, she said, but building them will lock in fossil-fuel use for decades, boosting greenhouse gases as officials strive to cut them.

“We are in a state of emergency,” said Stein, now a climate law professor at Albany Law School. “Every year we don’t act is lost forever.”

Cuomo’s top energy advisers didn’t respond to multiple interview requests by the Center for Public Integrity and StateImpact Pennsylvania over the past month. A spokesman for the New York Public Service Commission declined to make senior officials available for an interview. Instead, he pointed to anagency order, issued in 2016, adopting a series of “deliberate and mandatory actions” to implement Cuomo’s energy plan. In the order, the commission recommends preserving New York’s carbon-free nuclear power plants as a bridge to clean energy, and recognizes that “significantly increased air emissions due to . . . the construction of new gas plants” would complicate the ability to meet carbon limits.

A CPV spokesman declined to comment and didn’t respond to a list of written questions.  In a 2015 press release, the company touted its Wawayanda project’s “low emissions profile.” The highly efficient gas plant will replace older, less efficient facilities in New York, lowering carbon emissions by approximately 494,000 tons per year for its first 15 years, CPV says. “We are delighted to be bringing this project into construction at a time when the region is in need of new, clean electric generating capacity,” then-CEO Doug Egan is quoted as saying in the release.  

Neither the company nor its Valley Energy Center has been a stranger to controversy. Last year, federal prosecutors brought criminal charges against a former CPV executive and a former Cuomo adviser for allegedly participating in a scheme involving bribery, extortion and fraud. The executive, according to the 36-page indictment, paid “hundreds of thousands of dollars in bribes” to the aide for help trying to secure a contract with the Cuomo administration for it to buy electricity produced by the plant, to no avail.

The case has yet to go to trial, casting a shadow over the project.

The plant has also been the focus of an escalating regulatory skirmish over a 7.8-mile pipeline planned to deliver gas to the facility. In September, state environmental regulators denied a permit needed for construction of the pipeline, setting off a chain of legal appeals. Last month, a federal court halted construction until a hearing could be held, threatening to leave the plant without a viable gas supply.

“It’s one of the most amazing infrastructure debacles, and nobody is paying attention,” said Stephen Metts of The New School, whose work includes mapping new gas plants and pipelines in New York.

Unusual vetting process

What little attention the Valley Energy Center is attracting today dwarfs the virtual silence that greeted its unveiling. In 2008, CPV, a developer primarily of gas-fired electricity in the Northeast, came to Wawayanda, pitching a state-of-the-art facility that would generate enough “clean, low emissions electricity” to power more than 600,000 New York homes. The town was conveniently located near a transmission line.

In New York, state regulators typically review power plants proposed by private developers. At the time, though, the committee that would have evaluated such infrastructure wasn’t in place because the law authorizing it had expired. CPV sought an environmental assessment of its proposal from the Town of Wawayanda Planning Board, a rare request for a part-time body that mostly considers subdivisions, strip malls and car washes, people involved in the process say. Some believed a board composed of residents didn’t have the expertise to examine a utility-scale project, but most of the board’s members – enticed by CPV’s promises of economic rewards — were eager to move ahead.

CPV offered the town tax and benefit payments for hosting its facility totaling $11 million over 20 years. Millions more would go toward local schools and fire districts, the company promised. All told, CPV said, the plant would infuse more than $52 million into the county over this period.

In 2009, the planning board’s review stalled after consultants hired by the town flagged potential problems with the site, such as designated wetlands and endangered-species habitat. CPV got around the roadblock by agreeing to do additional studies after the board had approved a draft of the plant’s environmental assessment. The town then fired the consultants who had raised concerns, replacing them with a team that would find no major environmental impacts.

“The town wanted the project,” said Karen McDonald, one of the consultants who lost her job. “They never did an assessment of the true costs.”

Planning board chair Barbara Parsons declined to comment on the process, as did the town’s attorney, David Bavoso. In regulatory filings, the town has said the CPV plant “completed a comprehensive review costing hundreds of thousands of dollars,” which resulted in design modifications that will limit environmental harm. 

By the time most residents learned about the plant, it had already been approved. Community opposition didn’t gain momentum until 2014, when fracking became a contentious issue in New York and the moratorium was imposed. Feeling duped by what they considered a disingenuous fracking ban, the plant’s critics traveled to rallies in Albany and petitioned Cuomo.

In 2015, some residents sued the town of Wawayanda, claiming its planning board had carelessly assessed the plant’s environmental impacts — a claim the town has disputed in court hearings.

“People want to operate this facility, with all its environmental and climate implications, without studying it,” said plaintiff’s lawyer Michael Sussman.

At a state appellate court hearing in October, Sussman argued that New York had “radically changed its energy policy” since the plant was approved — grounds for a new environmental assessment. A lawyer for CPV responded that Cuomo’s fracking moratorium had no bearing on gas plants, like the one taking shape in Wawayanda, which would draw their fuel from other states. A decision is expected any day.

‘Red flags’

To its opponents, the CPV gas plant is the illegitimate progeny of pay-to-play dealings implicating a company executive and Cuomo’s “right-hand man,” in the words of federal prosecutors. In 2016, they secured indictments against Peter Galbraith Kelly, CPV’s former head of external affairs, and Joseph Percoco, Cuomo’s former executive deputy secretary, on six counts of bribery, extortion and fraud. The complaint charges that Kelly arranged for CPV to pay $287,000 in bribes to Percoco from 2012 to 2016 “in exchange for Percoco’s official assistance to benefit the company.”

According to the complaint, Kelly lobbied Percoco in an attempt to influence regulatory approvals and financing for the Wawayanda plant. Over the years, it’s alleged, the executive relied on legal perks to woo the aide — a $279 steakhouse lunch, a $2,748 fishing trip — before turning to bribes. Kelly is accused of creating what prosecutors call a “low-show” job for Percoco’s wife, who was paid $7,500 a month for doing little work.

In return, Percoco is accused of trying to help CPV land a lucrative agreement with the Cuomo administration, under which the state would buy power produced by the plant for 15 years. CPV valued such a contract at $100 million, according to the complaint.

Whether the alleged corruption enabled the plant’s approval is impossible to say. The federal complaint doesn’t answer that question, and prosecutors declined to discuss the criminal case, slated for trial in January.

CPV and Cuomo have said little since the indictments were announced last year. At the time, the governor called the charges against Percoco, a family friend, “a profoundly sad situation,” and said “those found guilty of abusing the public’s trust should and will be punished.” Governor’s Counsel Alphonso David ordered state agencies to suspend communications with CPV, including any final state regulatory approvals for its Wawayanda plant.

In a written statement, CPV described Kelly’s alleged conduct as “inconsistent with who we are,” and vowed to “continue our work in accordance with the high level of excellence our communities and partners have come to expect of us.” The indictment doesn’t link CPV itself to the alleged corruption. According to the government’s complaint, an unnamed former president for the firm told prosecutors its former CEO had “expressed concern about hiring the wife of a senior member of the Governor’s staff while the energy company was seeking extensive regulatory review of its power plant,” and had directed Kelly to get an ethics opinion from Cuomo’s office. That opinion never came, prosecutors allege.

The scandal has made plant critics deeply suspicious. Many can’t help but notice that the alleged bribery occurred while CPV was seeking critical state approvals such as air-pollution permits. Could that explain how state agencies let a project of this magnitude be handled by a town board? Or why state environmental regulators have seemed willing to excuse potential wetlands and endangered-species problems?

“There are big red flags that have no explanation other than corruption and big-money influence,” said Pramilla Malick, of Protect Orange County, whose house sits a quarter-mile from the compressor station. She and others have urged state officials to re-examine the gas plant and have voiced objections during the permitting of the Valley Lateral Project, a 16-inch pipeline planned to deliver 130 million cubic feet of gas a day to it. The pipeline, proposed in 2015 by Millennium Pipeline Company, sparked a protracted review by the New York State Department of Environmental Conservation over its possible impacts on wetlands and streams, culminating last summer in a six-hour public hearing and 6,000 written comments.

By September, state environmental regulators had denied the pipeline a permit on a conditional basis, pointing to what they called an “inadequate and deficient” climate analysis conducted by the Federal Energy Regulatory Commission, the regulator that approves new interstate gas pipelines.

FERC, which has long refused to take a comprehensive look at the climate effects of gas pipelines, said it simply relied on the town of Wawayanda’s environmental review – a position Cornell’s Ingraffea described as “absurd.”

Ingraffea, having pored over that review and the permit applications, said the company’s emissions calculations understate the plant’s climate footprint. CPV’s estimates have the facility pumping out 2.2 million tons of carbon dioxide annually, accounting for 7 percent of the New York power sector’s emissions, he said. This number doesn’t take into account the latest science on methane, a short-lived but exceptionally potent greenhouse gas released during drilling and transport of natural gas. Factoring in methane leaks, Ingraffea calculated that the plant would spew at least 3.3 million tons of greenhouse gases per year.

FERC has since overturned the state Department of Environmental Conservation’s permit denial for Millennium’s Valley Lateral pipeline. The department, whose appeal of FERC’s decision could be heard in federal court as early as January, said in a statement that it is “committed to ensuring the protection of New York’s natural resources, and will continue to vigorously defend its right to do so.” A spokeswoman for Millennium blamed the dispute on opposition to the CPV plant. The pipeline, she said, is “really the only thing standing between that plant running and not.” On Dec. 7, meanwhile, a federal court lifted the existing stay on the pipeline, allowing Millennium to begin construction.

Many plant opponents are preparing for defeat. Naomi Miller, a social worker from neighboring Middletown, fought CPV passionately for three years. In 2015, she and five others, including the actor James Cromwell, sat on crates outside the plant site and chained themselves together with bike locks, halting construction. The so-called Wawayanda Six were arrested for disorderly conduct. Last June, a county judge fined them each $375.

Construction has continued nonetheless. Miller – put off by what she called “the ambiguity of not allowing fracking in your state but allowing a plant burning fracked gas” — has moved to Vermont.

Susan Phillips of StateImpact Pennsylvania contributed to this story.

MORE FROM CARBON WARS: 

Natural gas building boom fuels climate worries, enrages landowners

Big power plant ignites political fight in small Pennsylvania town

'The fear of dying' pervades Southern California's oil-polluted enclaves

A last-minute infusion of cash is deluging the already unpredictable special Senate election in Alabama, and outside political groups backing both candidates — Republican Roy Moore and Democrat Doug Jones — are exploiting legal loopholes to hide their donors until after the Dec. 12 vote.

Some super PACs — groups that may accept and spend unlimited amounts of cash in elections — haven’t publicly disclosed anything at all. Others have found creative ways around unveiling the backers fueling final pushes in the waning days of the race, when voters are bombarded with the most ads, mailers and phone calls. 

“It’s a failure of federal election law, and donors have reasons for wanting to stay hidden,” said Brett Kappel, an election law specialist and partner at Akerman LLP. “We have an extremely controversial candidate that a lot of donors don’t want to be associated with, and on the other side, people and companies may be worried about retribution if they publicly oppose Moore and he wins.”

Several of the super PACs, which operate independently of the candidates, are timing their spending to avoid triggering disclosure requirements. As of Thursday, 22 groups spent money boosting or blasting Alabama candidates since Oct. 1. Yet only half of them disclosed the names, addresses and contribution amounts of people who, through Nov. 22, gave them money.

One newly-minted liberal group, Highway 31, aired millions of dollars of ads, despite having no money in its bank account. A conservative character scorched voters’ inboxes with fiery rhetoric, yet the author’s identity proves a challenge to uncover. 

The effect of the late outside spending is tough to predict in a race that has already seen more crazy twists than your average political thriller. 

Moore seemed a lock to win Sen. Jeff Sessions’ former seat. But a Nov. 9 Washington Post article was the first of several reports detailing accusations that Moore engaged in inappropriate sexual behavior with teenage girls, upending the race and boosting the chances of Jones, a former U.S. attorney. Moore has denied allegations of past non-consensual relationships with teenagers. 

Political powerhouses who put millions of dollars behind Sessions’ replacement Republican Sen. Luther Strange in the primary, including the Mitch McConnell-connected Senate Leadership Fund and the U.S. Chamber of Commerce, have so far declined to support Moore. 

Others have dithered: The Republican National Committee and National Republican Senatorial Committee initially cut Moore off, but after the president personally endorsed Moore, the RNC jumped back in. The National Rifle Association, after staying quiet through early December, on Tuesday spent almost $55,000 mailing anti-Jones postcards to prospective Alabama voters.

Second-and-third-tier super PACs with scanty track records and little known about them have jumped in to fill the gap. Those groups, combined with a handful of bigger names such as the Human Rights Campaign and the National Association for Gun Rights PAC, have spent more than $5.7 million on ads, mailers and email blasts since Moore beat Strange in the Sept. 26 Republican runoff. 

The $4.4 million boosting the Democratic candidate comes mainly from one mysterious super PAC and a group founded by Evan McMullin, who ran for president as an independent candidate in 2016. Moore, meanwhile, trails behind with the $1.3 million in support from a smattering of smaller entities. 
 

Meanwhile, Jones’ campaign committee raised more than $10 million from Oct. 1 to Nov. 22, while Moore’s committee raised a comparatively paltry $1.8 million. Politico reported that Jones’ campaign, as of late November, had spent about seven times more than the Moore campaign on TV ads. Campaigns, unlike super PACs, are subject to limitations: They can accept up to $2,700 from individuals and $5,000 from company PACs, and no money from corporations.

Jones’ campaign refused to comment on outside groups’ involvement in the race.

The mystery liberal behemoth 

On Jones’ side, a super PAC called Highway 31 spent nearly $4.2 million on mailers and online and television ads boosting Jones to date.

Who’s funding this massive effort? That’s not clear: Highway 31 is employing the legal, if rarely used, strategy of doing all its business on credit. That means it won’t have to reveal donors — if it even has any, at the moment — until several weeks after Alabama voters have voted.

The super PAC, ostensibly based in Birmingham, Alabama, disclosed carrying $1.1 million worth of debt to established political vendors such as Bully Pulpit Interactive LLC, which worked with President Barack Obama’s campaign and other high-profile liberal groups. It also owes millions of dollars to Waterfront Strategies, the preferred media company for House Majority PAC and Majority PAC, the main super PACs that work to elect Democrats to Congress.

The super PAC reports having no cash at the moment.

Asked about its financial arrangement with its vendors and who’s ultimately footing their bills, Highway 31 declined to comment.

“Highway 31 continues to follow every appropriate rule and regulation,” said Adam Muhlendorf, an Alabama communications consultant who heads Highway 31, in an email to the Center for Public Integrity.

Jennifer Kohl, vice president of GMMB, the parent company of Waterfront Strategies, said the firm is “fully compliant, and we don’t discuss client information.” Bully Pulpit Interactives did not return a request for comment.

But Paul S. Ryan, vice president for policy and litigation at Common Cause, questioned the arrangement.

“What does this political committee have, what is the collateral they offered, in order to instill a safe feeling with their vendors, that showed they’ll be able to pay these vendors back?” he asked. 

Election law expert Kappel notes that political committees aren’t obligated to report pledged donations before the money comes in. He added he wouldn’t be surprised if Highway 31 was connected to the Democratic Party somehow.

One of the group’s ads shows a closeup of a young girl’s face as a voiceover says, “If you don’t vote, and Roy Moore — a child predator — wins, can you live with that? Your vote is public record, and your community will know if you helped stop Roy Moore.”

The ad prompted Alabama Secretary of State John Merrill to release a statement Tuesday reminding Alabamians that who they voted for is not a matter of public record and not available to “anyone at anytime.” Google also agreed to remove the ad from YouTube and other platforms it owns.

“We are not really focused on the groups, we are focused on their messages,” said Brett Doster, a strategist for the Moore campaign, in an email. “The Highway 31 super PAC has been deceitful in a number of ways, and they should be investigated by the Federal Election Commission. It is real deception about saying that the way that people vote will be a public record.”

Super PACs need not disclose

And if a super PAC popped up in the race’s final days and spent a truckload of last-minute cash, it could legally hide the identities of its donors until 2018. (Such a scenario has played out before.) That’s just what Drain the DC Swamp PAC did: The Nashville-based group formed Nov. 30 and reported spending $10,000 on pro-Moore direct mail. Drain the DC Swamp PAC treasurer Elizabeth Curtis did not return a request for comment.

A handful of groups were exempt because of a quirk in federal election law: Instead of filing a financial disclosure report less than two weeks before Tuesday’s election, they instead exercised their legal option to file “monthly” reports that, to date, only reveal their donors through the end of October. In at least one case, a well-known megadonor funneled hundreds of thousands into a pro-Moore group.

This way, these groups aren’t required to reveal the identities of any of their contributors in November and December — at least, not until after Alabama voters have selected either Moore or Jones. And these weeks are when voters are flooded with messaging.

Others, such as the pro-Moore group Our Future in America Inc, used another work-around. In late September, it produced a series of ads promoting Moore. Then, during October and November, it went silent. But in early December, it emerged again, spending $35,000 on pro-Moore social media ads. The practical implication is that Our Future in America Inc. won’t have to publicly acknowledge its last-minute donors until after the election.

Another group, Patriots for Economic Freedom, failed to file mandatory campaign finance disclosure reports due in October and November.

Patriots for Economic Freedom’s treasurer Alexander Hornaday, when contacted by the Center for Public Integrity, said his organization simply forgot to file the disclosures.

“Thank you for your email as it reminded me that … we must file additional reports in relation to special elections,” Hornaday said in an email.

The pro-Moore hybrid PAC turned in the forms to the FEC five days late. The filings show the group garnered $26,000 in small-dollar donations in the last four months.

They also show Patriots for Economic Freedom spent almost all its money, or $90,000, on a consulting firm called Amagi Strategies for sympathetic email campaigns that cast doubt on Moore’s accusers and blame the “D.C. establishment.” Amagi Strategies is a New York City-based firm that shares an address with Patriots for Economic Freedom, a fourth-floor East Village apartment. Amagi is run by 29-year-old Tyler Whitney, the founder of the super PAC that employs it. Whitney ran a similar PAC that claimed to raise money to support conservatives, Conservative America Now, that benefited Whitney’s own firm. 

Whitney did not return multiple requests for comment, though in 2014 he told Breitbart that Patriots for Economic Freedom “is just another grassroots conservative PAC trying to make a difference.”

Lingering questions

At least two groups elicit more questions about their operations than answers.

A Lexington, Kentucky-based group named Club for Conservatives has been blasting out enraged emails signed by the treasurer, Brooke Pendley, a self-described “fire-breathing young female conservative patriot.” The emails berated liberals for their “feminazi hypocrisy,” attacked the character of women accusing Moore of sexual assault and bragged about the lack of financial help from the Republican establishment.

What we know

While many of the super PACs and other political groups involving themselves in Alabama’s special election are new organizations, at least one well-established political megadonor is helping fuel one of them.

Richard Uihlein, the CEO of shipping supplies distributor Uline Inc, pumped $100,000 into a pro-Moore group, Proven Conservative PAC, formed this August. The group received half of Uihlein’s funds on Nov. 22 — two weeks after the sexual assault allegations surfaced, according to federal disclosures.

“This PAC was formed by friends of Judge Moore because he has been a consistent and principled conservative throughout his career,” said Mike Hanna, a Proven Conservative PAC spokesman.

Proven Conservative PAC reported spending $234,000,mainly on TV ads boosting Moore, paid to a Plant City, Florida-based firm called Te Deo Gloria LLC linked to Design4 Marketing Communications. 

Almost half of the funds raised by Baton Rouge-based Solution Fund PAC came from one source: its treasurer, Robert San Luis, investor and “mobile home park expert.” He founded Excalibur Fund, a real estate investment firm specializing in RV and mobile home parks.

But a majority of the pro-Moore super PAC’s spending went back to a company with ties to San Luis, the Daily Beast found. At least $143,000, or 60 percent of its independent spending, went to two vendors with the same Newport Beach, California, UPS store address and unit number: Digital Victory and Digital Triumph. According to Louisiana incorporation records, the registered agent and manager of Digital Triumph LLC is San Luis. Solution Fund PAC paid these two companies for direct mail campaigns, calls and Internet and radio ads.

San Luis did not respond to requests for comment.

“With your financial support we are discrediteing [sic] Roy Moore’s accusers by directly reaching Alabama voters with the facts just uncovered on the ground,” a Nov. 30 email blast said. “Click here to help us get Alabama voters the truth.”

This article was co-published by NBC News.

READ MORE:

Watchdog demands Federal Election Commission crack down on fine-dodging nonprofit

Steve Bannon officially discloses source of $2 million in personal debt

Conflicted Interests: State lawmakers often blur the line between the public's business and their own

The Center for Public Integrity and The Associated Press analyzed financial disclosure reports from 6,933 state legislators nationwide and unearthed numerous examples of lawmakers who have introduced and supported legislation that directly or indirectly helps their own businesses, their employers or even their own personal finances.

The project also includes a unique resource for the public by putting all those disclosure reports online in a searchable library so anyone can learn more about their legislators’ personal financial interests.

The project has the potential to lead to far more stories. Listed below is the latest collection of state-specific stories by the AP and other news outlets that have localized the findings of the project for their readers:

Alaska:

Alaska lawmaker takes fight over conflicts to the voters (AP)

Arizona:

Lawmakers can’t vote to benefit themselves — until they can (AP)

Georgia:

Report: Lax rules in U.S., Georgia lead to legislator conflicts (The Atlanta Journal-Constitution)

Hawaii:

Hawaii lawmakers used to hearing about potential conflicts (AP)

Maryland:

An easier, stealthier way to search for conflicts of interest among Md. legislators (The Washington Post)

Michigan:

Michigan is 1 of 2 states where lawmakers’ finances unknown (AP)

Nevada:

Nevada waived legislator conflict rule for Raiders vote (AP)

New Hampshire:

Analysis points to 2 conflicts of interest in New Hampshire (AP)

New Mexico:

New Mexico Legislature under scrutiny for self-enrichment (AP)

New York:

Search for your legislator's potential financial conflicts (Times Union)

North Carolina:

North Carolina lawmaker expertise means conflict judgment calls (AP)

Ohio:

Find lawmaker ethics filings for Ohio and other states (database) (The Plain Dealer)

Rhode Island:

RI restores oversight of lawmakers who might have conflicts (AP)

Utah:

Utah lawmakers co-sponsored bill benefiting their employer (AP)

READ THE PROJECT: 

Conflicted Interests: State lawmakers often blur the line between public's business and their own

Find your state legislators' financial interests

Q&A: What we learned from digging into state legislators' disclosure forms

A veritable smorgasbord of organizations engage in political activities, and it can be tough to keep them straight. Here’s a menu detailing the differences among them:

Candidate committees— Anyone running for president or Congress has one of these. The candidate controls the funds. The funds come from individuals and political action committees (more on those in a second) and individuals. Contributions from corporations, labor unions and foreign nationals are banned. The current limit is $2,700 per election, or $5,400 counting primaries and the general election.

Political action committees— Traditional PACs are a way that businesses get around the corporate giving restriction to candidates. Employees of a particular company can make contributions of up to $5,000 to the PAC. And the PAC, often controlled by a corporate lobbyist, can make contributions to candidates of $5,000. There are other non-business PACs, too, such as those sponsored by labor unions and issue advocacy organizations.

Super PACs — These are political committees, made possible by the Supreme Court’s Citizens United v. Federal Election Commission decision and another lower court ruling, that can accept unlimited contributions from corporations, labor unions and individuals. Super PACs are independent, and they’re prohibited from coordinating most communications with a candidate committee, although some are run by close associates of the candidates they support. They are required to report the identity of their donors, but may accept money from “dark money” nonprofits, who aren’t themselves required to report their donors. The result: some super PACs use secret money to advocate for and against political candidates.

Hybrid PACs— A relatively new type of political committee may raise unlimited amounts of money to advocate for and against candidates like a super PAC — and at the same time collect limited amounts of cash to give directly to candidates. Hybrid PACs must maintain separate accounts for the two streams of money. But they also have the benefit of employing one set of staffers to handle both functions.

Social welfare nonprofits, a.k.a. 501(c)(4)s— These are the vehicle of choice for so-called “dark money” groups. Like super PACs, they can collect unlimited contributions from most any source, but unlike super PACs, they are not required to disclose their donors. The IRS says politics cannot be the primary purpose of these nonprofit groups but that rule is rarely if ever enforced.

Business leagues, a.k.a. 501(c)(6)s — These are typically trade-related nonprofit organizations, such as the U.S. Chamber of Commerce, that can act in essentially the same way as social welfare groups but aren’t quite as common for political “dark money” purposes.

Charities, etc., a.k.a. 501(c)(3)s — This the designation the Internal Revenue Service uses for charities, hospitals, universities and educational groups and is the most restrictive when it comes to political activities. Some small amount of lobbying is allowed, but spending on behalf of a candidate is absolutely against the law. Such groups must fulfill some sort of charitable or educational purpose to keep their tax status. Congress is, however, debating whether to repeal the Johnson Amendment — an action that would free 501(c)(3) nonprofits, including churches and other religious organizations, to engage in politics to a much greater degree.

There are other groups that partake in political activities, but these above are the main players.

— John Dunbar and Dave Levinthal
 

Commerce Secretary Wilbur Ross has divested his interest in Diamond S Shipping Group Inc., one of the world’s largest owners and operators of medium-range tanker vessels and the subject of a Center for Public Integrity investigation.

Ross “has fully divested of his interest in Diamond S. Shipping,” Commerce Department spokesman James Rockas said today, in response to questions from the Center for Public Integrity. Ross is currently in Beijing, traveling with President Donald Trump.

Critics have raised questions about whether overseas shipping investments are appropriate for Ross, who is among the Trump administration’s most influential trade policy players. Most of Diamond S Shipping’s fleet sails under Chinese flags, and the company has ties to a major Chinese investment fund.

Its ships have also visited ports in Russia and Iran— two nations that have for years found themselves in conflict with U.S. interests, and particularly so during Donald Trump’s nascent presidency.

Ross, who this week has also come under scrutiny for a separate shipping investment with ties to Russia, was not immediately available for comment. Rockas could not immediately say exactly when Ross shed his stake in Diamond S Shipping.

Diamond S Shipping did not immediately respond to a request for comment.

(Update, 6:07 p.m., Nov. 7: Randi Strudler of Jones Day, a lawyer representing Diamond S Shipping, said the company is owned by investment funds and does not have any independent way to verify the identities of those owning a stake in the investment funds at any given time.)  

Ross had been non-executive chairman of Diamond S Shipping’s board, according to filings with the Securities and Exchange Commission, and agreed to step down from his position with the company when he took the Commerce Department job, according to his public ethics agreement.

But during his confirmation hearing for the commerce secretary position, Ross confirmed he had no plans to divest his stake in Diamond S Shipping, and maintained that his investment didn’t pose a conflict.

“The research we've done suggests that there has never been a shipping case come before the Department of Commerce,” he said according to a hearing transcript, adding, “I intend to be quite scrupulous about recusal and any topic where's there the slightest scintilla of doubt.”

A Center for Public Integrity examination of Diamond S Shipping’s operations, however, found the company’s operations raised complex conflict-of-interest concerns.

Diamond S Shipping’s vessels call at ports all over the world. One of its main customers, commodities giant Glencore PLC, last year acquired a stake in Russian national oil company Rosneft, a deal that drew scrutiny from American and European regulators.

The Glencore-Rosneft deal marked the biggest foreign investment in Russia since the United States and the European Union imposed sanctions in 2014 because of the country’s military occupation of Ukraine’s Crimea region.

Rosneft is under U.S. sanctions. Glencore said the deal complied with the sanctions. Asked if the deal violated the spirit of the sanctions, Amos Hochstein, then U.S. special envoy for international energy affairs, said, "Clearly this is not what we were hoping for when we implemented sanctions."

Diamond S Shipping said it has — and may continue to — “call on ports located in countries subject to sanctions and embargoes imposed by the U.S. government and countries identified … as state sponsors of terrorism, such as Cuba, Iran, Sudan and Syria,” according to its 2014 filing with the SEC.

Diamond S Shipping is based in Greenwich, Connecticut, but is incorporated offshore in the Marshall Islands.

Ross’s use of offshore holding companies and his stake in another shipping company, Navigator Holdings, also drew attention  this week.

The International Consortium of Investigative Journalists and the New York Timesreported as part of the Paradise Papers investigation that Navigator’s biggest customer was a Russian company with ties to both a Russian oligarch under U.S. sanctions and Russian President Vladimir Putin’s son-in-law.

In an interview with Bloomberg, Ross said he would probably sell his Navigator stake.

“I’ve been actually selling it anyway, but that isn’t because of this,” he said.

Meanwhile, Ross has also this week faced questions from Forbes about the true value of his assets, and whether he properly reported them in federal financial disclosures.

This article was co-published by TIME, Public Radio International and the Buffalo News.

VERO BEACH, Fla.—The irony is rich. The Sunshine State taps the sun for less than half a percent of its electricity while making two-thirds with natural gas — a fuel that Florida must pipe in from other states.

Many have called this a risky bet. A coastal state already suffering punishing effects of global warming shouldn’t keep building power plants that pump even more greenhouse gases into the atmosphere, the Sierra Club warned. Natural gas prices are low now but will inevitably wallop customers down the road, the Florida Industrial Power Users Group predicted. As far back as a dozen years ago, when gas supplied less than 40 percent of the state’s electricity, then-Gov. Jeb Bush said utilities needed to stop depending so heavily on it.

But Florida’s power providers and their state regulators haven’t reconsidered their strategy. In fact, they’re doubling down on it.

More gas-fired electricity generation is under construction or planned in this state than in all but four others, U.S. Energy Information Administration records show. The building boom includes not only these plants but also a hotly contested tri-state pipeline to feed them. The new construction follows a 15-year surge in gas-fueled electricity production in Florida that topped the nation, outstripping even major gas producers such as Texas and Pennsylvania.

Never in its history has the industry’s key regulator, the state Public Service Commission, rejected a utility gas plant. The agency has repeatedly raised concerns about increasing reliance on gas, but its actions have moved the state further in that direction.

Now, even as they’re finally accelerating solar development, Florida’s electric utilities still expect to construct more than twice as many new megawatts powered by gas in the next decade as by the sun. Near Vero Beach on Florida’s east coast, this tug-of-war is already on display.

On land next to citrus groves, workers are installing more than 300,000 panels for a new Florida Power & Light solar site, one of eight the utility has under construction. Together, they’ll nearly triple FPL’s solar-powered portfolio. But roughly 20 miles west, the company is building a gas-fired plant — among the three biggest planned nationwide — that will power far more homes than all those solar sites combined.

The Florida power users group, representing large industrial electric customers, was among those trying to convince the Public Service Commission two years ago that the $1.2 billion-dollar Okeechobee gas plant wasn’t necessary. Solar would be a cheaper, smarter alternative, the group argued.

“The proverbial ‘You don't want to put all your eggs in one basket’ comes to mind,” Jon C. Moyle Jr., the group’s attorney, said at a hearing.

FPL, the largest Florida electric utility, said falling costs are now making solar competitive and this power source should rise to 4 percent of the company's electricity mix by 2023. That’s a significant hike. But it falls far short of top solar utilities such as Pacific Gas & Electric in California, already at 13 percent last year.

Gas remains key to FPL's plans. Its switch from oil and coal over several decades has been an unalloyed positive, bringing cheaper electric bills, cleaner air and fewer climate impacts than many other power providers, said Matt Valle, FPL’s vice president of development.

“We’re completely unapologetic about making that shift,” he said.

But gas plants developed in Florida haven’t simply displaced dirtier fuels. They’re also serving growing areas or replacing older gas plants, expanding the reach and lifespan of fossil fuels in a region especially vulnerable to their side effects.

Already, coastal communities such as Miami Beach are spending millions of dollars raising roads and erecting pumps to combat flooding from sea-level rise. September’s Hurricane Irma wreaked billions in damages after gaining strength in an abnormally warm ocean. Local officials face difficult choices as they try to tackle threats that climate-fueled changes pose to needs as basic as drinkable water and flushable toilets.

Nonetheless, Florida’s three largest planned gas projects — two plants under construction and one plant FPL aims to rebuild — would pump out roughly 9 million tons of climate-warming carbon dioxide per year over their decades-long operating lives, according to the nonprofit Rocky Mountain Institute, which promotes cost-effective decarbonization. That’s the climate equivalent of building two average-size coal plants. Leaks of the potent climate-warmer methane from infrastructure feeding the new projects will increase the emissions hit.

Florida has other options for keeping the lights on. But the path it’s taking is a profitable route for its investor-owned utilities. The Public Service Commission keeps obliging them.

The state wouldn’t need so much gas if it prioritized energy efficiency to avoid expensive new power plants. But energy conservation costs Florida utilities money because they sell less power. Three years ago, the Public Service Commission cut conservation goals by 90 percent after the utilities argued they were no longer economical. This year, a national energy-efficiency nonprofit, comparing the largest electric utilities on conservation efforts, ranked Florida’s among the worst.

Rooftop solar is another alternative. The state could offset nearly half its electricity needs this way, according to a 2016 federal analysis. But that too would threaten utilities’ profits because they don’t own those panels or the resulting power — their customers do. In 2014, the companies convinced the Public Service Commission to ax the state’s solar rebate program. Last year, they spent more than $20 million promoting a purportedly pro-solar ballot amendment widelypanned as precisely the opposite.

Even without more conservation or solar, the state could have ensured that utilities build only those power plants Florida needs. But when weighing FPL proposals for projects in recent years, the Public Service Commission dismissed arguments from customer advocates that the company's own figures showed it already had plenty of extra power and was focused instead on increasing profits. FPL said it needed the plants for reliability, and the agency agreed.

The commission said it carefully weighs all its decisions to balance customers’ and utilities’ interests. Its deputy executive director for technical matters, Mark Futrell, said commissioners have seen value in — for instance — replacing old gas plants with more efficient new ones requiring less fuel for the same amount of energy.

“These things are considered fairly,” he said.

But the watchdog group Integrity Florida concluded in a recent report that the system is effectively rigged in favor of the companies. Floridians representing consumers, businesses, environmental interests and state government echoed that finding in nearly 40 interviews with the Center for Public Integrity. They pointed to the millions of dollars the major utilities spend on campaign contributions that flow to state officials, many with a say over appointments to the five-commissioner agency, and the 96 lobbyists working on those companies’ behalf.

“The power the utility industry has . . . is enormous,” said Mike Fasano, a Republican who served in the state Legislature for two decades, “and anyone that tries to tell you differently is lying.”

The natural-gas state

The story of natural gas in Florida is also a story of FPL, which serves roughly half the state’s customers. The company, based in Juno Beach, started down this road to wean itself off oil. Then natural-gas prices jumped more than fivefold in the U.S. between early 1999 and mid-2008, with some of that increase ending up in utility bills.

In 2004, as FPL again sought to pass on higher fuel costs to customers, its officials said they would diversify their electricity generation to blunt such swings.

Instead, FPL doubled its reliance on natural gas. Hydraulic fracturing — fracking — unlocked gas from shale, and that supply rush tanked prices beginning in 2009. Suddenly gas looked like a smart choice. Fuel diversity, not so much.

FPL said its strategy has saved consumers $8.6 billion in fuel costs and prevented 108 million tons of carbon emissions since 2001.

Its residential customers pay 19 percent less for each kilowatt-hour of electricity than do average Americans, according to federal figures for 2016. If the Obama-era Clean Power Plan were in effect, FPL said it would already be in compliance far ahead of schedule — with coal just 3.5 percent of its mix and falling, its rate of carbon emissions is 30 percent better than the national average. Even replacing old gas plants with new ones substantially reduces those emissions, FPL said.

What upsets critics isn’t the shift to gas, but the extent of it — and that FPL and other Florida utilities are still adding gas plants. The electric grid covering most of the state is on track by 2021 to have the largest share of gas generation among all the U.S. and Canadian regional grids overseen by the North American Electric Reliability Corp., a regulatory body. This high reliance carries risks, the organization noted.

Florida utilities trying to protect against one risk — additional price spikes — have lost more than $6 billion in the last 15 years in hedging bets gone bad, according to Public Service Commission filings. Customers shouldered that cost. Protecting against another danger — supply disruption — is one reason utilities said they needed the new Sabal Trail pipeline, upsetting out-of-state property owners whose land it crossed.

Past governors called for more renewable energy. Bush, a Republican who served from 1999 to 2007, worried about over-reliance on gas. Charlie Crist, the Republican-turned-independent (and later Democrat) who followed him, feared the consequences of global warming and pushed the state to take action, winning no friends in the utility industry.

His successor, heavily backed by utilities, has different priorities. Republican Gov. Rick Scott put an FPL executive on his transition team, supported the pipeline and made national news for banning the state’s environmental protection agency from even referring to climate change.

Instead of being the renewable-energy leader Bush and Crist envisioned, Florida is rushing to catch up.

A 2017 ranking of states for the ease with which companies can use renewables, compiled for retail and information-technology trade groups, puts Florida sixth from the bottom. The state was 15th in the country for total solar generation last year, bested by less sunny places and far outstripped by other high-potential locales.

North Carolina — headquarters of Duke Energy, which runs Florida’s second-largest utility — has nearly six times the electricity powered by rooftop and large-scale solar, according to Energy Information Administration data. If No. 1 California stopped building solar altogether and Florida added as much new production every year as it has right now in total, they wouldn’t pull even until 2048.

FPL’s solar track record helped fuel spirited opposition in Hawaii to parent NextEra Energy’s ultimately unsuccessful plan to acquire that state’s largest utility owner. Hawaii is aiming for 100 percent renewable energy for electricity by 2045. NextEra’s sizable portfolio of solar and wind outside Florida — largest in the world, the company says — didn’t assuage concerns.

Asked by the Center when it might reach 50 percent renewable power, as California may do as early as 2020, FPL said that “setting an arbitrary goal for energy from renewable resources comes at a high cost and with reliability concerns.” California has high electricity rates, FPL notes — though other factors have contributed, including an overbuild of gas-fired power plants.

Both FPL and Duke Energy said precipitous price drops only recently made solar competitive with gas in Florida, among the minority of states without a requirement for utilities to hit renewable targets. The state requires a cost-driven approach, and FPL’s Valle said his company jumped on solar as soon as the economics worked.

“We’re building more solar than just about any other utility in the nation now,” he said.

Florida utilities told the state this year that they’re expecting to build 4,000 megawatts of solar and 8,900 megawatts of gas-fired power plants in the next decade. FPL planned about 2,100 megawatts of solar, which it’s now on track to build by 2023, and 2,900 megawatts of new gas-fired generation, retiring both coal and older gas units in the process.

In August, Duke Energy Florida agreed to build 700 megawatts of solar over the next four years rather than the similar amount it had expected to spread over a decade, along with a battery-storage project and more than 500 electric-vehicle charging stations. Still, the utility is also building a 1,640-megawatt gas plant. It will be capable of making more electricity than the coal units the utility plans to retire next year and the incoming solar combined.

The transition from fossil fuels isn’t going faster because the company must consider customers’ interests, said Tamara Waldmann, director of Duke Energy Florida’s distributed generation strategy and renewables. “We want to be mindful of the affordability of electricity in our state.”

The advancing disaster

Global warming brings its own costs. Air conditioning aside, these don’t appear on electric bills.

Philip Stoddard thinks about this a lot. Sitting at his dining-room table in October, 32 days after Irma battered Florida, he said he and his wife are saving money to prepare for the day climate problems render their home worthless and force them out.

Stoddard, mayor of South Miami (population 12,000) and a biology professor at Florida International University, lives three miles inland in an area that would be largely submerged— along with much of South Florida — under what the federal government considers a worst-case but worryingly plausible scenario by the end of the century. Some Florida scientists expect even higher sea-level rise. Stoddard is focused on keeping the city livable as long as possible, which means battling a faster-arriving consequence of a warming world.

In low-lying South Florida with its porous limestone, climate-fueled heavier rains and rising oceans drive up groundwater levels. It’s just a matter of time before that inundates a lot of septic tanks, said Leonard Berry, a coastal-risk consultant and professor emeritus at Florida Atlantic University. You flush your toilet, and the waste comes back — into your bathtub, your sink.

Stoddard, looking into fixes, sees a need for hard conversations with residents of his city’s lowest-lying neighborhoods. Do they want to pay for expensive upgrades or risk owning homes without working toilets?

He sees a future where some communities get ahead of climate problems and others are overwhelmed. Meanwhile, he said, his utility company keeps building gas plants that emit even more of the carbon pollution fueling this slow-motion tragedy.

“It’s going to cost more money, it’s going to pollute the environment — it’s like, why are they doing it?” said Stoddard, a fierce FPL critic. The answer, in his view: “They own natural gas.”

He’s talking about FPL’s 2015 investment in an Oklahoma shale-gas project, since turned over to another subsidiary of parent NextEra. NextEra also owns a third of the new pipeline, a deal in which Duke Energy took a smaller stake.

FPL said both investments mean “greater access to the fuel supplies needed to operate our power plants.” But the gas project was originally structured to make FPL money as well, and its parent will profit off the pipeline.

As for the Public Service Commission, it must approve the lowest-cost electricity — yet it could look at things more holistically. State law requires the agency to consider fuel diversity, for instance, but in practice it puts no value on it. In cost-benefit analyses, it doesn’t assign a monetary benefit to steps that would decrease gas reliance, according to the commission’s Futrell.

The commission also can examine future electricity costs related to climate change, a factor it cited in its denial of a proposed FPL coal plant a decade ago. That’s because customers will likely shoulder the cost of utilities’ power plants even if rules to curtail global warming force them into early retirement. But the agency couldn’t point to cases in which it had evaluated the odds that gas plants will become obsolete before they’re paid off.

That’s the fate facing new fossil plants if the world wants to meet the temperature goals set in the Paris climate agreement, which all countries but the U.S. have committed to achieve, said Drew Shindell, a climate scientist at Duke University. The alternative is installing expensive equipment to capture the plants’ carbon — or enduring more severe climate effects.

Shindell’s not arguing that gas is worse than coal. He’s saying the emissions are still too high. Continuing down the gas path, he warned, “will condemn Florida to going underwater.”

Florida’s power players

The shift across the country to cleaner electricity isn’t a simple exercise. Utilities must grapple with potential solar tariffs, tax policy, the likely future cost of battery storage, the best way of using intermittent energy sources. To make it easier and reward utilities for steps like helping customers use less power, some states have changed their regulatory structures by de-linking electric sales from revenues. Florida has not.

It’s hard to tell how much of Florida’s situation is driven by regulators as opposed to the companies they oversee. Investor-owned utilities, especially in recent years, have so much clout here.

The four largest of these utilities influence state lawmakers through political giving — in the 2016 election cycle alone, about $1.4 million to the Republican Party, $376,000 to the Democratic Party, at least $1.5 million to political action committees supporting the governor and other major state officials, plus direct contributions to about 80 percent of currently serving state legislators. They influence appointments to the Public Service Commission, according to the Integrity Florida report, a process in which both the Legislature and governor play a role.

They even influence the commissioners, who know from experience that a good job in the industry could await “if they do the bidding of the electric companies,” said Aubrey Jewett, a University of Central Florida political science professor. At least three former commissioners are lobbyists for electric utilities in the state.

Commission officials also realize if they push back too much, they’ll lose their jobs, said Timothy Devlin, ousted as executive director of the agency in 2011. The same happened to four commissioners in 2010.

Early that year, those commissioners voted to approve just 6 percent of the nearly $1.3-billion rate hike FPL asked for and rejected the $500 million increase Duke Energy’s predecessor requested. All were drummed out within months, two by the state Senate and the rest by a legislatively controlled nominating council.

During the rate case, FPL insiders said their company engaged in a covert campaign to undermine commissioners, according to a Miami Herald/Tampa Bay Times investigation. Consumer advocates saw their ousting as more of the same. FPL spokesman Dave McDermitt said in a statement that this and other claims about its pull in the state capital are “ludicrous charges by individuals or organizations with an old axe to grind or who are trying to advance their own political and/or policy agendas.” Of FPL’s spending on lobbying — seventh-highest in the state — and roughly $15 million in political giving in the 2016 election cycle, he said, “Like most Americans, we participate in the political process.”

Nancy Argenziano, an ousted commissioner who’d complained about furtive communications between commission staff and FPL, blames the company for her lost job. A fiery former Republican state legislator, she said the way the commission operates is appalling.

“It’s a cesspool,” she said. “The public has no chance.”

David Klement bought a house in Tallahassee before getting kicked off the commission, and lost it to foreclosure. He said his credit has only just recovered.

“I was so sad and angry that my effort to be an objective commissioner was foiled,” he said. “I could see the commission was going to go right back where it had been with rubber stamps and, sure enough, that’s what it became.”

There certainly seems to be no friction between the utilities and the commission anymore. At a regional conference last year, Julie Brown, its chair, welcomed the crowd of state utility regulators and industry executives, including from FPL and Duke Energy. She said she was looking forward to “the opportunity to have dialogue with fellow sister commissioners from different states in the South, and you know, not be subject to [the public-record] Sunshine Law … and really talk about the best practices,” according to audio recordings obtained by the Center, and urged “commissioners and utility leaders,” who responded with laughter, to have coffee or a drink together, “get to know them and develop those relationships.” Regulators and utility officials mingled over meals, golf and after-hours cocktails at the four-day conference.

The commission declined the Center’s requests to interview Brown and other commissioners. In a statement, it said Brown was simply encouraging commissioners from other states to strengthen their relationships with each other “and learn best practices.” The agency “vigorously strives to ensure that Florida’s consumers receive reliable, safe service at a reasonable cost,” balancing consumers’ needs with those of utilities, it said in its statement.

Critics often point to FPL’s gas-drilling deal in Oklahoma to illustrate how the commission tips the scales in favor of utilities. In 2014, the company asked to pass the cost of that investment on to customers, calling it an innovative way to lower fuel prices. Business and consumer groups argued the arrangement would force customers to shoulder “all the risk, 100 percent of it,” while FPL would get a guaranteed profit, said J.R. Kelly, who represents ratepayers as the state’s public counsel. Commissioners approved it against their staff’s recommendations. Last year Florida’s Supreme Court ruled that state law prohibited the move, overruling the commission. FPL had to refund $24.5 million to its customers.

FPL, undeterred, asked for a new law authorizing the investments. Legislators lined up in support this spring until the House speaker spiked the bill. Some environmental and consumer advocates worry FPL will try again.

Utilities’ vigorous attempts to shape rules that affect them extend to rooftop solar.

Slightly over half the states allow “third-party” companies to put panels on customers’ roofs for free and sell them the power, popular because it costs nothing up front. In New Jersey, which has less sun and a lot more solar than Florida, residents have largely gone that route. In some states it’s unclear whether the option is legal, but Florida is among the minority banning it outright.

As the Southern Alliance for Clean Energy, Conservatives for Energy Freedom and others worked to get a measure on the ballot to change that, four utilities spent millions funding a competing effort to protect it — by enshrining it in the state constitution with language that sounded misleadingly pro-solar. Only the utility-backed measure won enough signatures to appear on the ballot in November 2016.

The political-action group the utilities funded said the proposal “guarantees your right to place solar panels on your home” and would save residents from “rip-offs and scams,” such as businesses that “don’t want consumers to own and operate their own solar equipment” — presumably meaning firms that would offer an option to buy the power instead. (The group denied the measure would prohibit such deals.)

“The utility companies had a lot of people tricked,” said Zayne Smith with AARP Florida, which advocates for older Americans.

A strange-bedfellows coalition of Tea Party conservatives, climate activists, Florida’s League of Women Voters, singer Jimmy Buffett and others turned the tide — along with a leaked recording of an official from a utility-funded think tank saying how delightfully sneaky the ballot measure was. Voters defeated it.

The utilities still say they were looking out for customers. The “primary objective was to stop the dangerous, anti-consumer proposal” that never made it on the ballot, FPL’s McDermitt said in a statement.

The 'Ponzi scheme'

In states like Florida, where utilities still own power plants, the profitability of those assets acts as a “perverse” incentive to build more whether they’re needed or not, said Travis Kavulla, a Montana utility regulator and former president of the National Association of Regulatory Utility Commissioners. State officials must act as a check, he said.

Utilities do need some extra capacity as a cushion to avoid blackouts. The North American Electric Reliability Corp. uses a 15 percent reserve — after accounting for certain efforts to reduce energy use— as the standard for systems like those in Florida. Robert McCullough, a former utility executive now with energy consulting firm McCullough Research, said that even less — around 10 percent — would be sufficient for Florida.

But the state’s Public Service Commission struck a deal years ago with investor-owned utilities in Florida’s peninsula — most of the state — to have them keep a higher reserve of 20 percent. It stems from concerns that the peninsula is vulnerable because utilities can go only one direction if they need out-of-state power in an emergency. Florida “must be more self-reliant to maintain system reliability,” FPL’s McDermitt said in a statement.

But there’s so much queued-up generation that the peninsula’s electric reliability body expects the combined reserve will reach 25 percent by 2023.

Karl R. Rábago, a former utility executive and Texas utility regulator, examined FPL’s Okeechobee plant proposal for an environmental coalition challenging it in 2015. The company’s fleet was so large already that its own calculations showed a blackout risk equal to 1 day in roughly 2,600 years, “comparable to the risk of death caused by a falling meteor,” he told the commission. FPL expected the risk to rise before the plant’s opening, he said, but remain far smaller than the industry standard — 1 day in 10 years.

The Florida Industrial Power Users Group made a similar case about another proposed power plant. “FPL needs the Project largely to meet the financial projections provided to Wall Street,” the group told the commission.

FPL — which earned nearly $11 billion in revenue last year, propelling its parent to 170 on the Fortune 500 — won in both cases. The company called arguments by Rábago and others “unreliable and not worthy of serious consideration.” It pointed to a day in 2010 when it said it narrowly avoided a blackout despite a low risk calculation. It told the commission its programs reducing power usage had over the years “avoided the construction of the equivalent of 14 new power plants of 400 MW each.”

Rábago, who heads the Pace Energy and Climate Center at Pace Law School in New York, said FPL could have avoided even more if it had pursued the energy conservation it had claimed wasn’t cost-effective.

“It’s a Ponzi scheme,” he said. “You can’t keep delivering profits to your shareholders if you’re not re-upping and building newer plants.”

The solar push

Jody Finver drew gasps as she showed her electric bills to a roomful of people in Miami Shores: under $10 a month, down from roughly $110 before she put solar panels on her roof. Finver was telling the crowd how to go solar cheaper with Solar United Neighbors of Florida, a nonprofit helping people form co-op buying pools to get bulk discounts and technical assistance.

Finver’s panels produce enough to power her house and then some. But any amount of utility-produced power you don’t need because you’re making it yourself is great, she told the crowd. On top of saving money, “it means you’re not relying as much on the grid.”

A chapter of an organization expanding around the country, the group formed in the middle of last year’s battle over the solar amendment. It was kick-started by people like Deirdre Macnab, former president of the Florida League of Women Voters.

Utilities say the state has low rooftop solar adoption because electric rates are cheap. But because Floridians use more electricity in their hot — and getting hotter— state, the average residential bill here is nearly 10 percent higher than (and FPL’s roughly the same as) the national average. Macnab, who paid $3,000 a year for electricity before solar panels reduced that by two-thirds, said the co-op pitch is simple: You can save, too.

“We’re trying to get the state to a tipping point,” she said.

Solar United Neighbors of Florida has launched 19 co-ops, some still enrolling members and others that have helped about 500 households go solar. Six more co-ops are planned for January alone. Organizers are heartened by the demand — their waiting list for new co-ops extends through next fall — and by communities taking their own steps to move the needle.

Among those is Orlando, a city trying to go entirely renewable by 2050. Leaders made that commitment knowing their utility would cooperate: It’s municipally owned.

It’s also coal-heavy, so there’s a lot of work to do. Chris Castro, Orlando’s director of sustainability, thinks the goal is necessary and attainable. The city is trying everything: Amped-up conservation that propelled Orlando from the 30th to the 20th most efficient large city in the country in a 2017 ranking. A new solar site on a coal-ash landfill. A planned solar-with-battery-storage project. Panels on parking-lot roofs and a floating solar array in a pond.

And rooftop solar? Orlando’s utility is getting into the business. Taking a page from the co-ops, it’s launching a program to help customers aggregate their demand for lower prices.

But the utility serves 250,000 households and businesses. FPL, with 4.9 million customers, shapes Florida’s future in a bigger way.

Becky Ayech of the Environmental Confederation of Southwest Florida, which failed to convince regulators to reject the Okeechobee power plant, rues the direction the state is going. She sees the television commercials touting FPL’s record on solar. And all the while, Ayech said, “they’re still building a giant gas plant.”

MORE FROM CARBON WARS: 

Natural gas building boom fuels climate worries, enrages landowners

A behind-the-scenes look at Scott Pruitt's dysfunctional EPA

Big power plant ignites political fight in small Pennsylvania town

'The fear of dying' pervades Southern California's oil-polluted enclaves

A majority of potential voters — both liberal and conservative — back proposed legislation that would force former congressmen and congressional aides to wait longer before cashing in their government experience as lobbyists, according to a new study by the University of Maryland.

Currently, former House members and senior staffers must wait one year, and former senators two years, before they may lobby their former colleagues. The study found nearly four in five prospective voters approved extending former members’ cooling off period to five years or more. Almost one in three said members of Congress should never be allowed to lobby their former colleagues.

Senior congressional staffers aren’t spared potential voters’ dissatisfaction, either: 79 percent of Republicans and 74 percent of Democrats would like to see congressional staffers wait two years until lobbying instead of one.  

The transition from lawmaker to influencer-for-hire is a Washington, D.C., tale as old as telegrams and Ford Model Ts: Out of the 61 lawmakers who left office in January 2017, 19 of them found jobs in lobbying shops, though often with titles such as “strategic adviser” to avoid breaking the rules, according to data from the Center for Responsive Politics.

“What’s most striking is the degree of the unanimity of imposing these limits because they are rather severe,” said Steve Kull, director of the University of Maryland's Program for Public Consultation, which conducted the study. “Former members of Congress are seen as a major conduit in a way that Americans see as not serving the common good or common interest.”

One emerging pattern in particular caught Kull’s eye: how much conservatives favored stricter rules.

“I was surprised how many of these bills come from Republican sponsors, and how the Republican public was much more in favor,” Kull said. “That has not always been the case, and campaign finance reform tends to lean the other way.”

Lawmakers on both sides of the aisle introduced bills earlier this year that would change former members’ lobbying ban to five years. None of the legislation has yet made it out of subcommittee, meaning it’s unlikely to pass during 2017 or 2018.

“Is public pressure alone going to do it? No. But there is an active effort in numerous bills in Congress,” Kull said. “Clearly, members of Congress know that this is the kind of thing that the public is very unhappy about and they would get some credit. At the same time, it does have a pretty significant impact on their future earning potential, so they probably feel ambivalent about it.”

Craig Holman, government affairs lobbyist with Public Citizen, a nonprofit government reform group, said similar bills have been floated since passage in 2007 of the Honest Leadership and Open Government Act, which strengthened certain ethics laws and lengthened senators’ waiting periods to become lobbyists from one to two years.

“Ever since the last major change, there have been various bills with longer cooling off periods, and none of them to my knowledge have even gotten a hearing, let alone much attention,” Holman said. “It’s not impossible to achieve, but I think it has to be done on the heels of scandal. These bills normally do not fare well.”

But President Donald Trump’s administration “is appearing to be one of the most scandal-ridden in history,” Holman said, so “now may be the time we pass stronger ethics laws.”

Trump has argued that he seeks to “drain the swamp” that is Washington, D.C., with a package of ethics reforms that, in part, calls for members of Congress to wait five years before working as lobbyists.

Foreign lobbyists are also unpopular among Americans, the University of Maryland study concludes. About 75 percent of prospective voters — 81 percent of Republicans and 70 percent of Democrats — support banning senior executive branch officials from ever lobbying for a foreign government.

This isn’t surprising, Kull said, as Americans tune into the mounting investigation into Russian interference in U.S. elections. Former Trump campaign officials Paul Manafort and Richard Gates have already been charged with violating federal law that governs foreign lobbying. (This lobbying work of Manafort and Gates predates their tenure with the Trump campaign.)

Now, senior executive branch officials must wait one to two years depending on their seniority before they may lobby their former agencies on behalf of a foreign government.

Trump required executive appointees to sign pledges vowing to never lobby for another country’s government.

This doesn’t mean foreign lobbyists don’t participate in Trump’s White House: the Center for Public Integrity reported a former Panama lobbyist guided Trump’s new secretary of the Department of Homeland Security, Kirstjen Nielsen, through her confirmation process. Trump has also appointed a lobbyist for Saudi Arabia to the President’s Commission on White House Fellowships.

“The perception that special interests govern played a really key role in Trump’s election,” Kull said. “He spoke so strongly to this concern and said that the people in charge in this administration would not be beholden to them.”

READ MORE 

Mystery money floods Alabama in Senate race's final days

Watchdog demands Federal Election Commission crack down on fine-dodging nonprofit

Steve Bannon officially discloses source of $2 million in personal debt

A veritable smorgasbord of organizations engage in political activities, and it can be tough to keep them straight. Here’s a menu detailing the differences among them:

Candidate committees— Anyone running for president or Congress has one of these. The candidate controls the funds. The funds come from individuals and political action committees (more on those in a second) and individuals. Contributions from corporations, labor unions and foreign nationals are banned. The current limit is $2,700 per election, or $5,400 counting primaries and the general election.

Political action committees— Traditional PACs are a way that businesses get around the corporate giving restriction to candidates. Employees of a particular company can make contributions of up to $5,000 to the PAC. And the PAC, often controlled by a corporate lobbyist, can make contributions to candidates of $5,000. There are other non-business PACs, too, such as those sponsored by labor unions and issue advocacy organizations.

Super PACs — These are political committees, made possible by the Supreme Court’s Citizens United v. Federal Election Commission decision and another lower court ruling, that can accept unlimited contributions from corporations, labor unions and individuals. Super PACs are independent, and they’re prohibited from coordinating most communications with a candidate committee, although some are run by close associates of the candidates they support. They are required to report the identity of their donors, but may accept money from “dark money” nonprofits, who aren’t themselves required to report their donors. The result: some super PACs use secret money to advocate for and against political candidates.

Hybrid PACs— A relatively new type of political committee may raise unlimited amounts of money to advocate for and against candidates like a super PAC — and at the same time collect limited amounts of cash to give directly to candidates. Hybrid PACs must maintain separate accounts for the two streams of money. But they also have the benefit of employing one set of staffers to handle both functions.

Social welfare nonprofits, a.k.a. 501(c)(4)s— These are the vehicle of choice for so-called “dark money” groups. Like super PACs, they can collect unlimited contributions from most any source, but unlike super PACs, they are not required to disclose their donors. The IRS says politics cannot be the primary purpose of these nonprofit groups but that rule is rarely if ever enforced.

Business leagues, a.k.a. 501(c)(6)s — These are typically trade-related nonprofit organizations, such as the U.S. Chamber of Commerce, that can act in essentially the same way as social welfare groups but aren’t quite as common for political “dark money” purposes.

Charities, etc., a.k.a. 501(c)(3)s — This the designation the Internal Revenue Service uses for charities, hospitals, universities and educational groups and is the most restrictive when it comes to political activities. Some small amount of lobbying is allowed, but spending on behalf of a candidate is absolutely against the law. Such groups must fulfill some sort of charitable or educational purpose to keep their tax status. Congress is, however, debating whether to repeal the Johnson Amendment — an action that would free 501(c)(3) nonprofits, including churches and other religious organizations, to engage in politics to a much greater degree.

There are other groups that partake in political activities, but these above are the main players.

— John Dunbar and Dave Levinthal
 

MONTVILLE, N.J. — Homeless veterans. Breast cancer survivors. Disabled police officers. Children with leukemia.

In the name of helping these people and others like them, a private telemarketing company has for years solicited millions from donors while keeping the vast majority of the cash for itself.

The company, Outreach Calling, raised more than $118 million on behalf of about two dozen charities from 2011 to 2015, according to a Center for Public Integrity analysis of state government records. The company kept $106 million of this haul, leaving $12.2 million — or 10.3 percent — for its client charities.

Now Outreach Calling is expanding into the highly unregulated realm of political fundraising. In the first nine months of the year, the company has kept $1.3 million out of the $1.5 million raised for a veterans-focused political action committee that’s emerged ahead of critical 2018 midterm elections.

RELATED: Donors give millions to help veterans, but most goes to telemarketers

The man New York state regulators say is the driving force behind Outreach Calling is Mark Gelvan, a wealthy 49-year-old New Jersey businessman whom they banned in 2004 from fundraising in New York, in part because his solicitors impersonated police officers when they asked for donations.

It’s not against the law for telemarketers to keep most of the donations they raise. It is illegal to mislead prospective donors or lie to them about how their contributions will be used, said Jim Sheehan, head of the charities bureau for the office of New York Attorney General Eric T. Schneiderman.

Nonprofit watchdogssay the most effective organizations spend no more than 25 percent of their expenses on fundraising and overhead. CharityWatch, a nonprofit that analyzes charities’ financial statements, has given an “F” on an A+ to F scale to 13 of 16 charities that contracted with Outreach Calling in 2016 and 2017.

Two of the charities that hired Outreach Calling have been shut down by the New York attorney general’s Office in recent years, and Gelvan — whose wife owns multi-million dollar properties in New Jersey and Florida — remains under New York state investigation, according to court documents.

Banned for life

Gelvan’s work in fundraising spans decades and states.

In 1989, at age 21, Gelvan formed the fundraising company All-Pro Telemarketing Associates Corp. with two business partners, according to New Jersey business records. Within seven months, Gelvan was the sole director.

Over the next decade, he took on a stable of charities as clients, including groups with heartstring-tugging names such as the American Foundation for Disabled Children, the Committee for Missing Children and the Disabled Police Officers Counseling Center Inc.

Gelvan stood out among his competition in the telemarketing world, according to an analysis of reports produced by the New York Attorney General.

In 2003, the average telemarketing company registered in New York to raise charitable contributions  sent about 34 cents out of every dollar it raised back to the nonprofit that hired it and kept about 66 cents for itself, according to a report published by the New York attorney general’s office in 2004.

Gelvan’s All-Pro Telemarketing Associates Corp. fell far short of that average: it raised $4.2 million in 2003 and gave $550,774.96 back to the 15 charities it was working with, according to the report. Those charities received, on average, 13.3 cents out of every dollar Gelvan’s company raised for them.

Regulators took notice.

According to a complaint the New York Attorney General filed against him in 2002, Gelvan had raised $5.8 million from New York residents from 1996 to 2001 on behalf of the Fraternal Order of New York State Troopers Inc. Less than $900,000 of the $5.8 million All-Pro Telemarketing Associates Corp. raised during this period went to the troopers charity.

The New York State Attorney General’s office alleged that Gelvan’s solicitors pretended they were police officers when asking for donations.

After settling the case in 2004 and agreeing never to raise funds in New York again, Gelvan changed the name of his company from All-Pro Telemarketing Associates Corp. to All-Pro Associates Corp., according to records from the New Jersey Division of Revenue. Gelvan changed the company’s name again, in late 2005, to Outsource 3000 Inc.

The New York attorney general’s office says in court documents it believes Gelvan, through Outsource 3000, is financially linked to Outreach Calling, the telemarketing company that has kept 90 percent of the more than a hundred million dollars it has raised for charities in recent years.

The phantom at the top

Outsource 3000 is based at 150 River Road in Montville, New Jersey, according to New Jersey’s business records, but it’s not easy to find.

The office is about four miles from the $2.6 million gated home Gelvan’s wife owns in the tony Valhalla Estates neighborhood, overlooking Lake Valhalla.

Gelvan and his wife, Lina, bought the lot together in 2001, but Lina became the sole owner in 2002, two months after the New York Attorney General’s office filed a complaint against Gelvan and All-Pro Telemarketing Associates. Gelvan is registered to vote at the address of the Valhalla Estates home, which was built in 2008 on the lot Lina Gelvan owns.

When the Center for Public Integrity visited Outsource 3000’s office building last month, a directory listing for the company’s suite didn’t name the company. Instead, the sign said “ALL DELIVERIES.” The door to the suite was labeled “Mail Response Services.”

When asked if the office was the headquarters for Outsource 3000, a receptionist said no, it was the New Jersey office of Outreach Calling. When the reporter asked for Gelvan, the receptionist said he wasn’t in, but that she’d pass along a message. (Gelvan did not return the message left at his office or multiple calls to his cell phone.)

Damian Muziani, an aspiring actor, is listed as the sole owner of Outreach Calling.

Muziani exchanged several emails with the Center for Public Integrity but did not agree to be interviewed on the record for this story.

Numerous calls to Outreach Calling were fielded by people working for an answering service, and messages seeking comment were not returned.

Court documents filed in May by New York regulators allege that Outreach Calling is effectively controlled by Gelvan; the documents make no mention of Muziani.

Brian Arthur Hampton, who runs a veterans nonprofit and the Put Vets First! political action committee that contract with Outreach Calling, said he has never met Muziani in person, but Muziani signs the contracts between Outreach Calling and Hampton’s organizations.

Gelvan, not Muziani, has personally given Hampton a tour of Outreach Calling’s New Jersey office, Hampton said.

Like Hampton’s nonprofits, two breast cancer foundations from Florida also have links, via Gelvan, to Outreach Calling.

The Woman to Woman Breast Cancer Foundation was named to the Tampa Bay Times/Center for Investigative Reporting’s list of 50 worst charities in America in 2013. (So was Hampton’s nonprofit, Circle of Friends for American Veterans.)

Woman to Woman Breast Cancer Foundation founder Jacqueline Gray told the Times she and her husband struggled for years to raise money on their own. But Gelvan approached them with a deal: let him do the difficult telemarketing work while they waited for money to roll in.

All they had to do was agree to let him keep 90 cents out of every dollar he raised, according to the Times. They agreed, and their charity’s overall income skyrocketed from less than $15,000 in 2008 to $6.5 million in 2010.

Gray told the Tampa Bay Times that Gelvan gave her a tour of Outreach Calling’s phone room in New Jersey.

According to state records filed in Utah, Outreach Calling raised more than $8 million in the name of Woman to Woman Breast Cancer Foundation from 2010 to 2016. Only about 10 percent of that amount, or $816,000, made its way to the charity.

During the same time period, Outreach Calling raised $18.5 million  for the Aventura, Florida-based  Breast Cancer Survivors Foundation. It kept for itself all but $1.9 million, according to Utah’s records.

Dr. Yulius Poplyansky, a physician specializing in internal medicine who immigrated from Latvia to New Jersey in 1979, was close friends with Gelvan’s father, who also relocated from Latvia to the United States.

Poplyansky wanted to start a charity in 2009 that raised money for prosthetics and treatment to Israelis who had been injured by explosive devices, according to documents filed by the New York Attorney General’s office. He approached his friend’s son, Mark Gelvan, who was in professional fundraising, for advice.

Gelvan suggested Poplyansky focus on breast cancer instead — “a proven charitable money-maker” — and let Gelvan handle the fundraising for him, according to documents filed by the New York attorney general’s office.

Gelvan’s Outsource 3000 loaned the Poplyansky’s Breast Cancer Survivors Foundation $5,000 in May 2010 to defray start-up costs.

“I was personally devastated when I lost several patients to Breast Cancer,” a fictional doctor said on the foundation’s solicitation material, which was produced by Gelvan, according to the New York Attorney General’s documents. “By the time they came to our facility, they were in stage four and it was already too late.”

Poplyansky has no medical expertise with breast cancer or oncology.

The solicitation leads potential donors to believe that the foundation had a facility where it saw patients, but it didn’t, according to court documents filed by the Attorney General. It also said it conducted forums for breast cancer survivors and conferences for physicians, oncologists and survivors to exchange information, but there’s no evidence it ever did.

Tax returns show the foundation’s professional fundraisers raked in $11.7 million from 2010 to 2014, but the Breast Cancer Survivors Foundation itself received less than 10 percent of that amount.

The foundation “diverted millions of dollars away from legitimate breast cancer charities and programs,” the New York Attorney General’s office said.

In June, Poplyansky agreed to settle a complaint the New York Attorney General’s office brought against him and the Breast Cancer Survivors Foundation.

He agreed to pay $350,000 and shut his charity down. He also agreed to cooperate in the attorney general’s further investigations and to testify in related proceedings.

When reached via phone in Florida, Poplyansky said he didn’t keep in touch with Gelvan, his former family friend, and declined to comment.

“My lips are sealed,” Poplyansky said.

Gelvan is still under investigation by the New York Attorney General’s office.

Sheehan, head of the New York Attorney General’s charities bureau, said Gelvan remains a focus of investigators because of the number of charities he’s associated with that give up 85 percent to 90 percent of the donations his solicitors collect for them.

“You’ve got to work your way up,” Sheehan said when asked why Gelvan wasn’t sanctioned when the attorney general’s office shut down Poplyansky’s nonprofit. "You don’t use sharks to catch minnows.”

READ MORE:

Watchdog demands Federal Election Commission crack down on fine-dodging nonprofit

Liberals and conservatives agree: Ex-congressmen should put brakes on lobbying careers

Mystery money floods Alabama in Senate race's final days

The warning was prophetic.

Maurice Levite sat in a modest office in Falls Church, Virginia, about a decade ago, and cautioned his longtime friend, Brian Arthur Hampton, against continuing to use telemarketers to fund his small veterans charity.

With the help of his fundraisers-for-hire, Hampton had increased Circle of Friends for American Veterans’ income by an astounding amount — tenfold within threeyears.

But there was a catch — a costly one. The fundraisers were keeping most of the contributions donors were giving to the charity. Almost all of the money left over paid for overhead costs, such as Hampton’s salary. Veterans themselves received scraps.

Levite says he protested, but Hampton ignored him. He hired another telemarketer, Outreach Calling, to assist a related veterans nonprofit he runs out of the same office. This telemarketer — which the New York attorney general’s office says is run by a man they banned for life from fundraising in New York and remains under investigation — kept $9 out of every $10 raised.

Meanwhile, Hampton’s reported compensation quadrupled — to $340,126 between his two nonprofits in 2015 — in less than a decade.

“I’m flabbergasted,” said Levite, who served with Hampton on the board of Circle of Friends for American Veterans from 2006 to 2009. “Those figures blow me away.”

With help from Outreach Calling, Hampton is now expanding his operation into the largely unregulated world of political fundraising, sponsoring a veterans-focused political action committee that’s using the same money-generating tactics as his nonprofit groups, according to a Center for Public Integrity analysis of Federal Election Commission and Internal Revenue Service documents.

Hampton has already cashed in: During the first nine months of 2017, he paid himself $75,000 from his PAC. Out of $1.5 million the PAC has raised from donors, telemarketers have kept $1.3 million. Politicians and political committees that support veterans issues hadn’t received a cent through September.

RELATED: Charities employ controversial telemarketers to tug on heartstrings — and loosen purse strings

Hampton said he hires telemarketers because it is too expensive and time-consuming to try to raise money on his own.

“Over the course of 24 years, I have tried every other fundraising technique known to me in over four decades with fundraising experience, most of them over and over again, with different variations,” Hampton said in an email to the Center for Public Integrity (he declined to answer questions in person). “None of those efforts produced revenue remotely close to the revenue generated by telemarketing.”

He also defended his compensation: “I am the head of three organizations. I am always working.”

But Elaine Del Vecchio, a semi-retired New Jersey resident, said she felt duped after learning almost all of her donation to Hampton’s nonprofit went to a fundraising company instead of programs directly benefiting veterans.

“They served in the military — even foreign wars — and risked their lives, and now they’re homeless. That touched a soft spot in my heart, and so I just made the donation,” said Del Vecchio, who recently gave Hampton’s nonprofit $25. “We know that 100 percent of the donations can’t go directly to the cause, because the CEOs have to be paid and all that, but it should be reasonable.”

Charity watchdogs say the most effective nonprofits spend at least 75 percent of their expenses on program services and no more than 25 percent on fundraising and overhead. Hampton’s tax returns claim his nonprofits are spending just under a third on programs — but that’s only because telemarketers’ consulting fees are counted as “program” services. CharityWatch, a nonprofit that analyzes financial statements of charitable organizations, says Hampton’s nonprofits spend 7 to 11 percent on programs.

Hampton’s veterans operation is hardly alone. Telemarketer Outreach Calling has contracted with at least a dozen other charities— two of which have been shutdown by New York regulators — and keeps an average of 90 percent of the money it raises for them, according to state government records. And other veterans groups, such as the Wounded Warrior Project, have recently enduredscandals surrounding their spending.

The U.S. Supreme Court has ruled that it’s not against the law for telemarketers to keep most of the donations they raise, as long as they don’t lie about how the money is going to be used, said Jim Sheehan, head of the charities bureau for the office of New York Attorney General Eric T. Schneiderman.

“From the charitable entrepreneurs' perspective, there’s no downside. Whatever money they get is gravy,” Sheehan said. But at some point, “the gifts to the charitable activity are so low, it’s a fraud.”

‘Steamed’

Hampton, born in Michigan in 1943 to university professors, is himself a veteran.

He enlisted in the U.S. Army in 1968, served a year in Vietnam in “psychological operations” during the war and was in the Army Reserves from 1970 to 1992, according to a biography he provided the Center for Public Integrity and personnel records from the Army and National Archive. He retired with the rank of major.

It was 1993 when Hampton — “steamed” that the government was leaving veterans behind, in his opinion — said he co-founded Circle of Friends for American Veterans, a 501(c)(3) nonprofit charity, out of a bedroom in a small co-op apartment in Virginia. He later formed the Center for American Homeless Veterans, a 501(c)(4) “social welfare” nonprofit, which operates from the same office as Circle of Friends for American Veterans according to tax records.

The nonprofits’ early years proved rocky, the groups’ missions ever-changing.

Hampton said he and his business partners initially tried to raise funds themselves, but it was grueling, inefficient work.

They tried to run a donation call center on their own, too, but that also wasn’t worth the effort.

When they turned to telemarketers, they found they had more time to dedicate to charitable work, he said.

The charitable work initially involved running a transitional shelter for homeless veterans in Northeast Washington, D.C.

But running a shelter took up all their time.

Hampton decided he could help more veterans by putting to use his communications background, which involved working as a political campaign consultant and operating fundraising and communications businesses. He abandoned the shelter concept and launched a nationwide educational program instead, aimed at raising awareness of the needs of veterans.

The Circle of Friends for American Veterans began to stage rallies around the country. Hampton said he has hosted more than 100 members of Congress across 196 veterans shelter-themed forums in 46 cities.

But Hampton stopped hosting rallies earlier this decade. They were too expensive and took too much time to plan, he said.

Now, Hampton said the nonprofit focuses on communicating the needs of veterans to politicians, donors and the public. The Circle of Friends for American Veterans sometimes goes by the name “American Homeless Veterans” and the Center for American Homeless Veterans sometimes uses “Association for Homeless and Disabled Veterans.”

“There is no group that I know of that does what we do, educate and advocate for 21 million American Veterans,” he wrote.

His small staff accomplishes this, he said, through a “massive bipartisan program” of phone, fax, email and snail mail contact with more than 500 candidates for Congress; an “earned media machine” that generates attention through news releases; and the publication of the “Veterans Vision” newsletter once every two years.

Hampton and his employees have convinced 330 current and former members of Congress— including several on the House and Senate veterans affairs committees — to get behind a four-paragraph Veterans Bill of Rights that calls for reforms at the U.S. Department of Veterans Affairs.

According to the 2015 tax statement filed by the Center for American Homeless Veterans, Hampton and his employees wrote news releases on behalf of candidates, which in turn sent them to media outlets. The tax statement says, “Approximately 4,000 media outlets received the advocacy news releases, ultimately reaching an estimated over twenty-eight million people nationwide.”

A search for Hampton and his related organizations  on LexisNexis, a vast archive of press releases, news articles and transcripts, indicates the groups are not often mentioned in the press.

In an April fundraising letter signed by Hampton and obtained by the Center for Public Integrity, Hampton tells prospective donors that Center for American Homeless Veterans is supporting programs that are successful in “getting homeless veterans off the street and into productive lives.”

But the Center for American Homeless Veterans’ tax return offers little evidence that the organization is funding or otherwise directly supporting such endeavors. Its 2015 tax return indicates it provided just $200 in grants to other organizations out of $2.5 million in overall expenditures, the vast majority of which paid telemarketers.

‘The smell test’

Levite, a retired fundraising executive, joined the Circle of Friends for American Veterans’ board in 2006 at Hampton’s personal request.

Levite recalled that Hampton’s desire to help veterans appeared sincere, but Hampton’s board meetings were poorly attended. Members of the board didn’t spend much time reading his financial reports, either, Levite said. Hampton “played everything close to the vest,” Levite added.

Meanwhile, Hampton’s decision to engage telemarketers turned the organization’s financial books inside out.

The nonprofit’s fundraising budget rose from $3,106 during the 2006 fiscal year — less than 1.5 percent of its overall expenses — to $1.9 million in 2009, or 87 percent of its expenses, according to annual tax filings for those years.

Levite raised concerns. He reminded Hampton that the National Society of Fund Raising Executives, the organization that first brought the two friends together in the 1970s, cautioned against the use of telemarketers that kept a high percentage of the money they raised, Levite said during a phone interview from his home in Alabama.

Hampton told the Center for Public Integrity that he planned to let telemarketers keep no more than 20 percent of the proceeds they raised when he first turned to outside fundraisers.

But that didn’t happen. Telemarketing, Hampton said, proved to be more expensive than he thought:

• Outreach Calling, the telemarketer representing the Center for American Homeless Veterans, kept $3.7 million, or 90 percent, of the $4.1 million it raised for the nonprofit in the 2014 and 2015 tax years, according to the charity’s annual IRS tax filings. Records filed by Outreach Calling in Utah claim the telemarketer has kept $7.9 million out of $8.7 million it raised for the charity from 2011 to 2015.
   
• Since 2015, Outreach Calling has raked in $2 million from the Put Vets First! PAC, the political action committee Hampton runs out of the same Falls Church office as his nonprofits. That’s 89 percent of the $2.3 million in donations the PAC has received in the same time period, according to Federal Election Commission filings.
   
• Charitable Resource Foundation, the telemarketer working for Circle of Friends for American Veterans, kept $6.4 million, or 85 percent, of the $7.5 million it raised from donors between the 2011 and 2015 tax years, according to IRS filings.

Hampton’s veterans operation is a cog in an even bigger fundraising machine — one that’s funneled more than a hundred million dollars in charitable contributions out of donors’ pockets and into a private company, according to a Center for Public Integrity analysis of licensing records maintained by the Division of Consumer Protection in Utah’s Department of Commerce.

Outreach Calling, based in Reno, Nevada, raised more than $118 million on behalf of about two dozen charities from 2011 to 2015, according to Utah’s records. The company kept $106 million of that, leaving $12.2 million — or 10.3 percent — for its client charities, which include the Childhood Leukemia Foundation, the Disabled Police and Sheriffs Foundation and the Kids Wish Network.

That Outreach Calling keeps 90 percent of the donations it raises on behalf of the Center for American Homeless Veterans was shocking for Dave Silver, the president and founder of Operation Yellow Ribbon of South Jersey, a small nonprofit that sends care packages to active-duty American service members in the Middle East.

“Oh my goodness,” Silver said. “Ninety, as in 9-0? It’s disheartening to hear all this.”

Operation Yellow Ribbon of South Jersey doesn’t use professional fundraisers to generate income, and Silver doesn’t pay himself a salary. He said he spends 20 to 30 hours a week running the nonprofit in addition to his full-time banking job.

In his experience, it’s hard to raise money because potential donors are already stretched thin.

“The other nonprofits that are out there that are trying to do the right thing … it makes it harder for us,” Silver said.

The American Legion, which bills itself as the “nation’s largest wartime veterans service organization,” doesn’t monitor the fundraising practices of other organizations but is proud of its own financial record, spokesman John Raughter said in declining to comment on Hampton’s use of telemarketers. The American Legion, which is supported in part by membership dues, spent less than $7,000 — or .01 percent of total expenditures — on professional fundraisers last year, according to its 2016 tax return.

Randi Law, spokeswoman for the Veterans of Foreign Wars’ national headquarters, also declined to comment on Hampton’s practices.

Hampton said he doesn’t have a problem with the steep cost because fundraising is a risky enterprise. The telemarketers shoulder the liabilities and create awareness among potential donors while the charities, freed from the burden of dialing for dollars, focus on their mission.

But nonprofit watchdogs aren’t impressed with Hampton’s operations.

The Better Business Bureau of St. Louis issued an alert in June urging donors to “exercise caution” when deciding whether to give money to the Center for American Homeless Veterans.

According to the alert, a woman in Quincy, Illinois, told the Better Business Bureau a telemarketer led her to believe her contribution to the nonprofit would provide direct assistance to homeless veterans.

“Instead, it appears that more than 95 percent of the donations are used to pay the fundraising firms, salaries for Hampton and other employees and other expenses related to running the charity’s office,” according to the alert.

Both of Hampton’s nonprofits, the Circle of Friends for American Veterans and the Center for American Homeless Veterans, received “Fs” from CharityWatch, a nonprofit organization that uses an A+ to F scale to rate nonprofits based on their financial transparency and spending habits.

“It’s somewhat of a minefield for donors to locate a high-performing veterans charity,” said Daniel Borochoff, president of CharityWatch.

Nonprofits that get As and Bs on CharityWatch’s scale spend about 70 percent of their contributions on core programs and services, Borochoff said.

Charity Navigator, another watchdog that evaluates nonprofits, gives the highest ratings to charities that spend at least 75 percent on programs and no more than 25 percent on fundraising and administrative overhead. (Charity Navigator does not rate either of Hampton’s nonprofits.)

In the latest tax filing available for the Center for American Homeless Veterans, three telemarketers raised about $2.4 million — keeping a combined $2.2 million for themselves. This means the Center for American Homeless Veterans pocketed only about 10 percent of what was raised, or $244,529.

Yet the Center for American Homeless Veterans also states in the same tax form that it spent $681,178 on “programs” that year.

A closer look at the tax form indicates most of the Center for American Homeless Veterans’ “program” spending in late 2015 and early 2016 — $514,663 — ultimately paid for unspecified “consulting” services provided by a familiar source: telemarketers.

Hampton did not respond to a question about why so much of his nonprofit’s “program” expenses ultimately went to hired telemarketers.

As for Center for American Homeless Veterans programs that appear to directly benefit veterans, the nonprofit states in its most recent tax form that it distributed 20,000 copies of the 40-page “Veterans Vision” publication; conducted an “earned media” campaign; informed the public about veterans issues via radio interviews and news releases; and contacted more than 500 candidates for Congress, urging them to make veterans a high priority.

The Center for American Homeless Veterans’ tax filings contain “a lot of red flags,” said Marcus Owens, who for 10 years led the IRS’ exempt organizations division and today is a partner at law firm Loeb & Loeb LLP.

Both of Hampton’s nonprofits spend an “extraordinary” amount of money on fundraising — so much so that it might attract the attention of the IRS, state attorneys general and the Federal Trade Commission, Owens said. (The IRS did not respond to requests for comment about Hampton’s nonprofits.)

Borochoff of CharityWatch theorized that Hampton’s nonprofits are classifying some of the money spent on telemarketers as services to veterans. Hampton acknowledged in an email that certain expenses classified as “program” costs were payments to professional fundraisers.

”They may be able to do a few positive things, but you know, they are woefully inefficient,” Borochoff said. “Not much is going to happen with your donation to help veterans.”

Hampton dismissed as insignificant the “F” ratings his nonprofits received from CharityWatch.

“These charity sites contain no consideration of how a charity makes a difference in the lives of people,” Hampton said.

But a pair of U.S. congressmen said Hampton shouldn’t raise funds in the name of veterans if he’s not going to spend most of it helping them.

“Any person or organization who raises money under the pretense of helping veterans, but who then … profits from the exploitation of veterans and their families, should be ashamed of themselves and be held fully accountable,” said Rep. Tim Walz of Minnesota, the highest ranking enlisted service member ever to serve in Congress and the ranking Democrat on the House Veterans Affairs Committee.

Rep. John Sarbanes, D-Md., said Congress should look into ways to crack down on organizations that spend most of their money on fundraising. At the very least, it should be easier for donors to research how charities are using their money, he said.

As for Hampton’s operation?

“It doesn’t pass the smell test, and everybody knows that,” Sarbanes said.

The Center for Public Integrity contacted the offices of every Republican member of the House and Senate veterans affairs committees about Hampton’s operations. None responded to requests for comment.

President Donald Trump, for his part, declared November National Veterans and Military Families Month, proclaiming the importance of protecting the “heroes” that have “braved bitter winters, treacherous jungles, barren deserts and stormy waters to defend our nation.”

White House spokesman Hogan Gidley declined, however, to discuss Hampton’s veterans groups or whether federal laws governing the use of charitable contributions should be changed.

In the red

The financial future of Hampton’s two nonprofits appears fraught despite the millions of dollars telemarketers are raising in the groups’ names.

That’s because Hampton’s two organizations have been running a deficit in recent years, as expenses have outpaced revenue, tax returns show. Since 2010, the groups’ debts have also exceeded assets, such as cash and property.

Hampton said he has deferred more than $400,000 in salary owed to him because the organizations haven’t had enough cash to pay him. Hampton said these deferments are reported as liabilities.

Hampton’s groups also owed the IRS more than $100,000 in payroll taxes stemming from audits the agency conducted several years ago, according to its latest tax statements.

Owens, the former head of the IRS’s charities bureau, said operating at a loss for a number of years, maintaining negative net assets and delinquent payroll taxes are “pretty clear signs that the organizations are at risk” of financial failure.

Hampton’s nonprofits hired their own private auditor to review the organizations’ books.

Kenneth Taylor, a Falls Church-based auditor who completed audits of the two charities the past several years, said he didn’t see the need to formally question the solvency of either of Hampton’s nonprofits because they have cash flowing in every year.

Taylor also said he isn’t worried about Hampton’s organizations fulfilling their payroll tax obligations because they are on payment plans with the IRS.

If Hampton’s nonprofits become flush with cash at some point, Hampton stands to gain the salary he’s deferred.

Despite the fact that he hasn’t been able to fully pay himself, Hampton is hiring.

On Nov. 16, Hampton emailed staffers on Capitol Hill seeking applicants for a director of programs and communications position that would pay $73,000 annually. It’s unclear from where that money would come.

Accountability

Nonprofit organizations of all sorts are invariably led by boards of directors that, among their duties, provide financial oversight.

One of the board members who last decade provided financial oversight for Hampton’s Circle of Friends for American Veterans was an attorney later convicted of wire fraud for stealing money from a veterans charity of his own.

John Thomas Burch Jr., a Vietnam veteran and a former attorney in the U.S. Department of Veterans Affairs, ran the National Vietnam Veterans Foundation Inc.

After he left Hampton’s board, Burch was using his nonprofit’s “emergency assistance program” funds to pay women to have sex with him in hotels in Baltimore and inside his Rolls Royce, according to court documents filed by the U.S. Attorney’s office for the District of Columbia.

The New York attorney general’s office separately accused Burch of using the National Vietnam Veterans Foundation’s assets to pay for personal expenses, including travel, insurance, medical bills and parking. It also questioned the foundation’s fundraising practices.

Telemarketers captured about 90 percent of the tens of millions of dollars Burch’s National Vietnam Veterans Foundation raised in recent years. The telemarketing firm that earned the most? Outreach Calling, the same firm used by Hampton’s veterans organizations.

In November 2016, Burch settled a civil suit with the New York attorney general’s office, paying $100,000 in restitution, returning his $5,300 severance from the foundation and agreeing to cooperate with investigations into its fundraisers.

In June, Burch pleaded guilty to one count of wire fraud in the U.S. District Court for the District of Columbia. He was sentenced in October to five months in prison followed by 24 months of supervision, including five months of home detention.

At the sentencing hearing, Burch declined to comment to the Center for Public Integrity.

But as part of his settlement with the New York attorney general’s office, Burch wrote a letter of apology“to the millions of individuals that donated” to the National Vietnam Veterans Foundation, only to have most of their contributions fund anything but veterans programs.

“As donors, you put your trust in me to make sure that your donations helped veterans, not to pay fundraisers and finance my personal entertainment pursuits,” Burch wrote.

Hampton declined to discuss his relationship with Burch, likening the question to “McCarthyism.”

“Based on the news accounts I have seen,” Burch “got what he deserved and maybe even less,” Hampton said.

Political fundraising in an accountability vacuum

Hampton’s Circle of Friends was already bringing in more than $2 million a year in revenue in 2010 when he started the Put Vets First! PAC out of the same Falls Church office.

The PAC, which by law may promote and contribute money to politicians and political causes, didn’t report much financial activity early on, according to FEC records.

But starting in 2015, Put Vets First! contracted with Outreach Calling for telemarketing services.

Despite their high cost, Hampton said he chose to use Outreach Calling because they’re “the best in the industry” at raising funds.

During the 2016 election cycle, about $707,700 out of $782,200 in expenditures went to Outreach Calling.

About $25,600 was spent on unspecified “program services,” $6,100 was used on “program development” and $5,000 was spent on veterans advocacy. Four congressional candidate committees received $1,000 apiece, for $4,000 total.

The rest — about $31,300 — was spent on salaries, bank fees, legal services, payroll taxes and accounting services.

In the first nine months of this year, FEC filings show Outreach Calling has received $1.3 million out of $1.5 million spent by the PAC. Hampton received $75,000. None of the money went to candidate committees.

So far, Put Vets First! PAC appears to be the only federal PAC using Outreach Calling as a fundraiser, according to an analysis of FEC filings.

But one of Outreach Calling’s subcontractors, Eatontown, N.J.-based Residential Programs, also has expanded from the charity world into politics. (Residential Programs did not respond to a message left in person or to several phone calls.)

The company is now raising money for the Coalition for American Veterans, a super PAC with a P.O. Box in Alexandria, Virginia. The treasurer for the super PAC, which may raise and spend unlimited amounts of money to advocate for and against politicians, is Brent Evans, who could not be reached for comment. A former treasurer, Thomas Datwyler, declined to comment.

Out of $646,500 the super PAC spent in the first nine months of this year, telemarketers have received more than $595,000. The rest has gone to fundraising consulting and bank fees, according to federal disclosure reports.

Colton Strawser, a spokesman for the Coalition for American Veterans, said the super PAC is spending a large portion of its money on fundraising because it recently reopened after a period of inactivity and is trying to grow.

Strawser would not divulge the identities of the founders of the super PAC. He said they did not wish to speak to a reporter.

Massachusetts resident Karen Tyler got a call on her cell phone from someone who wanted her to donate $100 to the Coalition for American Veterans.

Tyler, who works in the Massachusetts Department of Veterans Services, prefers to give to local charities, and she doesn’t respond to unsolicited requests for money, so she told the caller no.

“They said to me, ‘What do you mean? Don’t you care about veterans?’” Tyler recalled. “And I was like, ‘Hold on here. I eat, breathe and sleep veterans issues.’”

Paul S. Ryan, vice president of policy and litigation at Common Cause, said there’s no federal campaign finance law requirement that super PACs or any political committee actually spend money on elections.  

“People who set up a super PAC could use the money to buy a yacht and sail off into the sunset drinking margaritas without violating any federal campaign finance law,” Ryan said. “Super PACs that depend on major donor funding would never do so because the political professionals who run the PACs would destroy their professional reputations.”

As so-called “non-connected committees,” the Coalition for American Veterans and the Put Vets First! PAC fall into a gap in regulation between the Federal Election Commission and the Federal Trade Commission, said Brett G. Kappel, government affairs and public policy partner with the law firm Akerman LLP.

“Unscrupulous people have moved into this gap and are taking advantage of it because it’s there,” Kappel said.

The FEC cannot change its regulations to address this gap unless the law is changed, Kappel said. FEC officials have asked Congress to expand its fraud jurisdiction for at least a decade, to no avail.

Brendan Fischer, director of the federal and FEC reform program at the Campaign Legal Center, said he hasn’t seen fundraisers in the charity realm moving into the largely unregulated world of political action committees, but it makes sense.

“I wouldn’t be surprised if opportunists, if fundraising opportunists, are seeing … PACs as a new way to make money off of unsuspecting, well-intentioned donors,” he said.

Sarbanes, a vocal opponent of super PACs, condemned their use as fundraising mechanisms.

“The bottom line is this,” Sarbanes said. “The more money that sloshes around in our political system, the more opportunity there’s going to be … to take advantage of that and try to make a fast buck.”

The American Petroleum Institute was born in a ballroom at New York’s Biltmore Hotel at the end of World War I. Among its founding members were the same regulators entrusted to oversee the industry. 

Over the course of a century, API has embedded itself in the U.S. government. Decades ago, the institute embarked on a campaign to sell Americans on a fossil-fuel future, despite having heard dire warnings of climate change as early as 1959. With more than 650 corporate members, the group now encompasses every sector of the oil and gas industry, from drilling to plastics manufacturing.

The Center for Public Integrity will be hosting a Twitter chat on Thursday, Dec. 14 at 1 p.m. EST/10 a.m. PST with reporter Jie Jenny Zou to discuss the findings of the investigation -- visit our Twitter page for the chat @Publici or follow the hashtag #usofpetroleum.

Check out the stories here:

The United States of Petroleum

• Part 1: The unlikely partnership between Big Oil and the White House
• Part 2: How the oil industry set out to undercut clean air
• Part 3: Wave of climate lawsuits threatens the future of Big Oil

Caroline Hunter and Ellen Weintraub share a relationship that’s sometimes icy, occasionally testy and rarely dull. Their public disagreements as Federal Election Commission commissioners have spanned a decade across myriad matters material and trivial — political ads, memory skills, breakfast food.

But the dynastic duo, who on Thursday became FEC chairwoman and vice chairwoman for 2018 — both have served years in these capacities before — are forging a detente. 

Hunter, a Republican, recently sought out Weintraub, a Democrat, to privately discuss FEC issues, from improving agency efficiency to more tightly regulating internet-based political communications, on which they might actually agree. In separate interviews, both commissioners said they’re focusing not on their differences, but commonalities — a marked change of tone from two strong personalities who’ve gone stretches without speaking to one another.

At issue is whether their thaw is ultimately for naught. The six-member commission, which regulates and enforces the nation’s campaign finance laws, could face a de facto shutdown just as 2018 congressional midterm elections heat up.

Absent speedy intervention by President Donald Trump and the U.S. Senate, the FEC could soon lose at least two commissioners, and with them, the requirement that four commissioners be present to conduct high-level business such as making rules, levying fines, approving audits and offering political committees official guidance.

Worst case scenario? Hunter and Weintraub find themselves alone atop the FEC, with nothing to do.

Both are Zen about the possibility.

“We’ll just need to keep plugging and chugging while we still have a quorum,” Hunter said.

“It’s so out of my hands I can’t worry about it, but it’s an argument for making every day we’ve got count,” Weintraub said.

A slow bleed

Of the FEC’s six commissioner slots — no more than three may be occupied by a single political party — one has sat vacant since March, when Democrat Ann Ravel resigned.

Outgoing Chairman Steven Walther, an independent, and Republican Commissioner Lee Goodman, could quit at any moment. Both continue to serve in “holdover status” despite their six-year terms having long ago expired — the same situation in which Hunter and Weintraub also find themselves.

Walther says he’ll be back at the FEC to begin 2018 as a rank-and-file commissioner, but hasn’t decided how long he’ll stay. “I’m mulling it over,” he said.

Goodman, for his part, has eyed leaving the FEC for months. A political attorney by trade, he says he’s had several private sector opportunities. But he’s so far turned them down.

“Every time I look to leave [the FEC], there’s another fire to put out. I am open to leaving; I’m not bound by any commitment to stay,” Goodman said.

Then there’s the curious case of Republican Commissioner Matthew Petersen.

Petersen’s departure from the FEC appeared imminent, as Trump in September nominated him to serve as a federal district judge for the District of Columbia. But Petersen’s Senate Judiciary Committee confirmation hearing last Wednesday proved disastrous, with Petersen, who the American Bar Association ranked as “qualified,” struggling to answer a flurry of pointed questions about both the law and his experience.

Calling video of the exchanges “my two worst minutes on television,” Petersen withdrew from consideration Monday, saying in a letter to Trump that “until the time is otherwise appropriate, I look forward to returning to my duties at the Federal Election Commission.”

Trump had already nominated Texas lawyer Trey Trainor as Petersen’s replacement after briefly slotting Trainor to replace Goodman. The Senate Rules and Administration Committee has not conducted a confirmation hearing for Trainor, nor is one yet scheduled. Given this, it’ll be weeks, even months, before Trainor could plausibly join the FEC.

And while Senate Rules and Administration Committee officials declined to comment on the record, two people familiar with Trainor’s confirmation process confirmed the committee is unlikely to move forward with hearings and votes until Trump also nominates a Democrat.

The White House acknowledged questions from the Center for Public Integrity about Trump’s plans for nominating FEC commissioners, but did not answer them. Trump’s White House counsel is former FEC Chairman Don McGahn, an outspoken critic of federal campaign finance regulations who frequently sought to limit the scope of FEC authority.

The FEC last lost a quorum and shut down a decade ago. The six-month hibernation not only froze agency business but “it was very, very congested with enforcement cases when we got back up,” Walther said.

“Today, we need a full commission as fast as possible,” Walther added, “but that’s very much up to the president.”

FEC not well-known

Such uncertainty surrounding FEC leadership comes at a time when the public is acutely concerned about matters — such as the sources behind political advertisements — within the commission’s jurisdiction, even if they know little about the panel itself.

More than 70 percent of Americans say their knowledge of the FEC doesn’t extend beyond knowing the agency’s name, according to a Center for Public Integrity/IPSOS poll conducted last week. Just 8 percent of respondents considered themselves “very familiar” with the FEC; 30 percent have “never heard of” the FEC, the poll indicates.

But more than eight in 10 poll respondents, regardless of party affiliation, either “strongly agree” or “somewhat agree” that political ads both on TV and online should be required to say who paid for the ad. The FEC in early 2018 is expected to consider new rules for online political advertising disclosure, which are less stringent that rules governing political ads on TV.

Poll respondents are also divided on whether U.S. political elections are “fair and open:” 50 percent say they “somewhat” or “strongly” agree that they are, while 43 percent say they “somewhat” or “strongly” disagree.

Big issues — and uncertainty

The FEC’s leadership tumult also comes at a pivotal time for the agency itself, which is slated to move its headquarters from downtown Washington, D.C., across the street from the FBI’s headquarters, to a smaller, more modern space near Union Station, the city’s main train station.

Commissioners insist the move, while assuredly disruptive to staff, shouldn’t negatively affect the agency’s most public functions, such as publishing terabytes worth of federal campaign finance data online.

Were the FEC to close its doors in 2018, Hunter and Weintraub agree that an agency shutdown would delay hard-fought progress on several key issues that have actually brought a degree of consensus among commissioners.  

That commissioners have found common ground on these matters is notable in and of itself: The FEC’s liberals have long lamented what they consider the agency’s failure to fully honor its post-Watergate promise of combating corruption and graft, at times accusing conservative commissioners of rendering the FEC impotent through inaction.

Conservatives, meanwhile, have waged low-level war against agency overreach, blocking left-leaning colleagues’ attempts to, in their telling, enforce election laws Congress never passed and squelch political speech the Constitution’s First Amendment protects.

Nevertheless, the commission has scored several recent, if modest victories for bipartisanship.

At Walther’s prodding, the panel agreed this month to more transparently account for the dozens of election law enforcement cases, a few of which have lingered for years.

Both Hunter and Weintraub expressed strong desire to reduce this backlog, although Hunter cautioned that the FEC sometimes has good reason to wait to rule on some cases, such as when federal courts are simultaneously grappling with a matter before the FEC. “There’s more than meets the eye with some of these, and it’s important to get the law right,” Hunter said.

At the FEC’s final meeting of 2017 on Thursday, the five commissioners unanimously agreed to ask Congress for a dozen different changes to federal law.

Among the recommendations: Forcing senators to file their campaign finance disclosures electronically — they still do so on paper — and prohibiting political committees from engaging in “potentially fraudulent fundraising and spending” that involves raising money with the promise of supporting candidates, then using almost none of it for that purpose. Congress routinely ignores the FEC’s annual legislative wish list, but Hunter and Weintraub urged that lawmakers give serious consideration to this year’s offering.

Also on the FEC’s agenda next year is tackling agency vacancies. It’s been four-and-a-half years since the agency last had a permanent general counsel to lead a legal department that represents about one-third of its 350-person workforce. The FEC’s inspector general, Lynne McFarland, retired in March without the commission replacing her.

Other senior-level positions that are vacant or filled on an “acting” basis include chief financial officer, accounting director, chief communications officer, deputy staff director for management and administration, associate general counsel for policy and deputy chief information officer.

Hunter said some “acting” staffers may become permanent. In the meantime, she added, she’ll work with Weintraub to look for other ways to make the agency, with an annual budget of just north of $70 million, more efficient — including whether some agency jobs should be changed or eliminated to better suit agency needs.

Goodman is also pressing for the agency to adjust its rules to reduce federal campaign finance reporting burdens on state and local political parties, a subject on which he thinks there may be agreement among commissioners.

Perhaps the most high-profile issue the FEC will tackle in 2018 is what to do about internet-based political communications.

A Russian company with suspected ties to the Russian government sponsored thousands of political issue ads. Given this, Weintraub, in particular, has insisted the FEC address alleged foreign influence in U.S. elections.

At the agency’s last public meeting of 2017, it took a modest step toward this goal, ruling after several hours of minutiae-parsing debate that conservative political activist John Pudner’s Take Back Action Fund political group must disclose who paid for Facebook ads it sponsors. Pudner, an advocate for increased campaign regulations, asked the commission for the ruling, which applied only to his organization and others that engage in political activity “indistinguishable” from that of Pudner’s group.

Hunter and Weintraub have agreed in principle to work with one another on a broader, if still limited, process in 2018 to craft regulations addressing online political ad disclaimers.

It’s a notable, even startling departure from not more than one year ago, when the notion of the FEC regulating any internet communication for any reason prompted death threats against then-Democratic Commissioner Ravel.

But the specter of an agency shutdown and shared goals on hold loomed even at the agency’s final meeting of 2017, as commissioners began taking what should have been a perfunctory vote naming Weintraub vice chairwoman for 2018.

Goodman, one of three Republican commissioners, left the meeting early. Weintraub chose to abstain instead of vote for herself.

The commission, therefore, couldn’t conduct a vote because it didn’t have four commissioners willing or able to cast votes. Goodman, hours later, ultimately cast a ballot for Weintraub, averting an open-ended delay — for now.

READ MORE:

Veterans charity raises millions to help those who’ve served. But telemarketers are pocketing most of it

Liberals and conservatives agree: Ex-congressmen should put brakes on lobbying careers

A former Panama agent is guiding Trump's Homeland Security pick

Ken Rees has made a fortune selling loans with triple-digit interest rates to borrowers with poor credit history or no credit history.

Over the years, he’s developed a knack for finding loopholes in usury laws in states that cracked down on so-called payday loans — a label that has morphed from describing short-term, small-dollar loans to include longer-term loans that carry sky -high interest rates but still can trap borrowers in a cycle of unsustainable debt.

Rees got into the payday lending business in 2001 by starting ThinkCash. The company spent its early years avoiding state laws prohibiting high-interest loans by paying a fee to First Bank of Delaware, a federally regulated bank that was exempt from state regulations outside its home state and could originate the higher interest-rate loans.

More than a decade ago, this so-called “rent-a-bank” arrangement was common among early payday lenders. Federal regulators ruled that the model was deceptive and took enforcement action against the most egregious violators. Since then, the industry has evolved, and it’s unclear what is legitimate and what is deceptive, leaving enforcement spotty.

But in 2008, federal regulators ordered First Delaware to stop working with payday lenders — including ThinkCash — so Rees changed his company's name to Think Finance and started striking deals with Native American tribes, which, as sovereign entities, are also exempt from state usury laws.

In 2014, the state of Pennsylvania filed a still-pending lawsuit claiming Think Finance used the tribes as a front to make deceptive loans. Think Finance denies the charges and Rees started a new company, Elevate Credit, which operates from the same building in Fort Worth, Texas. Elevate deals in online installment loans, a cousin to payday loans, and partners with a Kentucky-based bank to offer lines of credit with effective annual interest rates much higher than would otherwise be allowed in some states.

Critics say this arrangement has all the hallmarks of a rent-a-bank relationship that effectively evades state laws limiting payday loans, but the existing rules regarding such rent-a-bank partnerships are murky at best and only intermittently enforced. Now Congress, in trying to help expand credit for poor people, may be inadvertently codifying the rent-a-bank partnerships that allow payday and high-interest lenders legally avoid state usury laws, according to those critics.

Sponsors say the Protecting Consumers Access to Credit Act facilitates bank partnerships by ensuring third parties like debt buyers and rapidly growing financial technology firms can buy, and collect on, loans originated by federally regulated banks regardless of state laws governing interest rates. These partnerships can help make credit available to those left out of the traditional banking system, primarily low-income individuals, backers say. The bill, viewed by many lawmakers on both sides of the aisle as a way to help low-income families, is now embroiled in an intense argument over whether the measure would in fact make state interest-rate caps, designed to protect the working poor from high interest-rate lenders, irrelevant.

“The bill covers every flavor of online lending,” said Adam Levitin, a consumer law professor at Georgetown University. “Some members of Congress have gotten snookered that they are fostering innovation, but a loan is just a loan whether you do it online or not.”

‘They just disappear’

Financial technology, or “fintech,” has become a darling of Wall Street and policy makers who view the industry’s innovations — creating credit scores based on nontraditional data and mobile apps that make banking services accessible from home — as a way to make banking cheaper and more convenient. Its laudable end goal is to provide the 34 million American households that have little to no access to credit a way to participate in the financial system.

But now more payday-style lenders are moving online and donning the friendly face of a tech startup. Some, like LendUp, a lender charging more than 200 percent on some loans and counting Google Ventures among its investors, have attracted mainstream support. Like many high-interest online lenders, LendUp says it is “a better alternative to payday loans” because they use alternative data sources to determine interest rates but consumer advocates say the product, a high-interest loan that can quickly lead to a cycle of debt, is essentially the same thing.

Online payday lenders are notorious for exploiting cracks in the regulatory system, said Paul Chessin, a former senior assistant attorney general in Colorado who helped bring some of the earliest cases against payday lenders.

“They just disappear” behind a network of fronts and shell companies, Chessin said.

Elevate, which went public in April, is quick to distance itself from traditional payday lenders by noting its loans have lower interest rates than payday loans, whose rates can climb close to 600 percent. Elevate said in an email it is committed to lowering rates further, and said its loan terms are more transparent and it doesn’t charge expensive fees associated with payday lenders.

Elevate’s installment loan called RISE is licensed in 17 states that don’t impose interest-rate caps and charges annual interest rates as high as 299 percent. Elevate says repeat borrowers can eventually qualify for interest rates as low as 36 percent on subsequent loans.

“Our customers are not being served by banks and have been pushed to products like payday loans, title loans, pawn loans and storefront installment loans,” Elevate officials said in an email. “They are difficult to underwrite and riskier to serve because they have limited savings and volatile income but they rely on credit to deal with everyday issues like needed car repairs.”

Fifteen states and the District of Columbia impose interest-rate caps, most around 36 percent, to protect consumers from high-interest loans.

To do business in states that do have interest-rate caps, Elevate partners with Republic Bank and Trust, based in Louisville, Kentucky. Federally regulated banks such as Republic are only subject to the usury laws of their home states and aren’t required to abide by the legal caps on interest rates or loan fees in other states where they do business.

Through Republic, Elevate offers Elastic, an open-ended line of credit, which means it doesn’t have a fixed repayment date. It carries an average effective annual interest rate of 94 percent. Elevate said Republic Bank follows regulations set by the Federal Deposit Insurance Corp. and the Consumer Financial Protection Bureau (CFPB).

Republic sells all but 10 percent of the Elastic loan balances to investors affiliated with Elevate shortly after origination. This is typical of a rent-a-bank relationship, critics said, where Republic acts as a pass-through enabling Elevate to avoid state usury rate laws.

Rees and his former company, Think Finance, are facing lawsuits filed in several states, including a recent complaint from the CFPB alleging the company collected on loans that were illegal under state laws. Think Finance recently restructured in 2014 as a Limited Liability Company and transferred assets to a subsidiary “in an effort to avoid liability for the illegal loans made to consumers,” according to lawsuits in Virginia and Florida which are still pending. In October, under new management, Think Finance filed for bankruptcy protection after a hedge fund cut off its funding.

Elevate declined to make Rees available for comment and Think Finance executives didn’t respond to requests for comment.

Congress to the rescue

As a publicly traded company, Elevate is required to disclose to its investors any risks to future profits. Among those risks, Elevate lists in its most recent filing a 2015 ruling by a federal appellate court in Madden v. Midland, a case from New York. The court ruled that third parties, in this case a debt buyer called Midland Financial LLC, were not entitled to the same exemption from state interest-rate laws as the national banks they partnered with to buy the loans. Therefore, Midland couldn’t pursue the same high-interest rates for the loans it purchased.

The ruling spooked the financial services industry, which claims the decision discourages technology providers and fintech companies from working with national banks, thereby limiting credit options to borrowers.

The fintech market is exploding, attracting more than $13 billion in investments in 2016. Congress has taken notice. In July, Reps. Patrick McHenry, R-N.C., and Gregory Meeks, D-N.Y., introduced the Protecting Consumers Access to Credit Act, which passed the House Financial Services Committee Nov. 15.

According to a press release issued by McHenry and Meeks, the legislation “would help preserve the innovative partnerships banks have forged with financial technology firms” by reaffirming the so-called valid-when-made doctrine, “a 200-year-old legal principle” which states that if a loan is legal with respect to its interest rate, it cannot be invalidated if it is subsequently sold to a third party.”

In doing so, consumer advocates say the bill would remove states’ ability to enforce their own interest rate laws if a lender partners with a federally regulated bank.

“Our concern is that this legislation would open the floodgates for predatory loans to be made nationwide, even in states that have interest-rate caps that keep payday loans or other kinds of high-interest loans out,” said Rebecca Borné, a senior policy counsel at the Center for Responsible Lending, a nonprofit research and policy group.

Meeks is a member of what the Center for Public Integrity labeled in 2014 the “banking caucus,” those who have received the most money from the financial industry, and a favorite target for campaign contributions from payday lenders. Over his career, Meeks has received $148,000— the eighth-highest amount among active House members — from payday lenders and their trade groups, such as the Online Lenders Alliance, a group of payday and high-interest lenders, according to the Center for Responsive Politics.

Payday lenders have made $120,999 worth of campaign contributions to McHenry during the same period, placing him 11th among active House members. Elevate CEO Ken Rees personally donated $5,000 to the McHenry campaign in September, just two months after he introduced the protecting consumers bill, Federal Election Commission recordsshow.

McHenry didn’t respond to requests for comment.

Meeks said in an emailed statement sent to the Center for Public Integrity that the bill preserves the ability for federal agencies to regulate rent-a-bank partnerships and expands access to more affordable credit in underserved communities.

When the bill was marked up in the House Financial Services Committee last month, Meeks supported an amendment that would place a 36-percent cap on all loans covered by the bill. The amendment was introduced by Rep. Maxine Waters of California, the ranking Democrat on the committee, but it was not adopted. Meeks said he is working with the Senate to preclude high-interest rate lenders from the bill.

Still, Meeks said in his statement that “claims that the bill's intent is to open the door to high interest rate loans are disingenuous and contradict public facts.”

In the Senate, the legislation is sponsored by Sens. Patrick Toomey, R-Pa. and Mark Warner, D-Va. Toomey has received the second most money from payday lenders in the Senate. He pocketed $110,400 from lenders, second only to Sen. Richard Shelby, R-Ala., over the period since 2007, according to the Center for Responsive Politics.

Toomey didn’t respond to requests for comment.

One of Warner’s top campaign donors over the course of his career is Covington and Burling, one of the firms Elevate hired to lobby for the bill. Covington and Burling’s employees and political action committee have given Warner more than $100,000 since 2009.

A spokesperson for Warner said in an email that “campaign contributions have never influenced Senator Warner’s decision making on policy matters and never will.”

The spokesperson also said Warner supports cracking down on payday lenders through a CFPB rule requiring lenders to determine upfront that borrowers can afford to repay their loans.

“The scenario that some advocates have described – in which a payday lender uses a nationally-chartered bank as a front for issuing consumer loans – was prohibited prior to the Madden v. Midland ruling, is prohibited now, and would remain prohibited under this bill,” the statement said. “However, Senator Warner is considering adding language to the bill specifically to allay those concerns, and is currently in discussions about the best way to do that.”

The bill is still in committee, and its future is uncertain.

Georgetown’s Levitin said no law prohibits nationally chartered banks from operating as a conduit for high-interest lenders. Banking regulators can only follow “vague, non-binding regulatory guidance,” he said, but they must be willing to take action against bad actors.

However, “in the current environment, it’s hard to believe that they’re going to crack down on them,” he said.

Meek’s office said he believes there needs to be greater regulatory clarity distinguishing between legitimate partnerships and rent-a-bank schemes that lead to potentially abusive products.

Congressional staffers and lobbyists said Elevate told them the Protecting Consumers Access to Credit Act is not relevant to its business model. But Elevate wrote to at least one opponent of the legislation, who asked not to be identified, to stress that, despite its high interest rates, it was not a payday lender, but rather a “fintech,” and the bill is “essential” to support innovative credit products like theirs.

When asked about the legislation, Elevate officials said in an email that the company, “like other fintech lenders, supports any efforts that would clear up regulatory uncertainty, responsible lending and lead to more financial innovation for U.S. consumers."

READ MORE:

Who is killing the CFPB’s arbitration rule? 

Trump, Wall Street and the ‘banking caucus’ ready to rip apart Dodd-Frank