The Other McCain

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Ruh-Roh: Watchdog Warns of ‘Red Flags’ in Gingrich Campaign’s Financial Reports

Posted on | April 28, 2012 | 30 Comments

Newt Gingrich campaigns in Fort Myers, Fla., Jan. 30, 2012

Before we get to the news, let me make a disclaimer: Every time I criticize Newt Gingrich’s disastrous presidential campaign, some of Newt’s supporters get angry at me and seem to miss the point of my criticism. From my perspective, the person Gingrich’s admirers should be most angry at is Newt himself, because if you thought he was the best candidate, the mismanagement of his campaign is a grievous fault.

In my mind, however, the two phenomena are inseparable: Good candidates do not run bad campaigns. Trying to explain this point of view — that of someone who is a longtime student of campaign tactics and strategy — is difficult, because most people don’t look at the political process the way I do. Ali Akbar keeps bugging me about an idea for a book I once suggested, to be called Operatives, about the people behind the scenes of campaigns. Spend enough time with operatives, the hired guns whose job is win elections, and it changes the way you see politics.

All of that is sort of an apology in advance to Gingrich supporters for returning to a theme I’ve been pounding since Feb. 21 when, reacting to the release of Newt’s FEC report for January, I declared that his campaign’s “burn rate” was unsustainable. (For that matter, Mitt Romney’s burn rate in January was also unsustainable, but Romney began the year with cash reserves Newt didn’t have, and Mitt had much greater fundraising potential.) Gingrich’s failure to win in the weeks after South Carolina, especially his fourth-place finishes in Minnesota (Feb. 7) and Maine (Feb. 11), suggested a campaign that was much weaker than anyone might have gathered from watching TV coverage.

Then there were the reports that Newt spent a lot of time leading up to the Feb. 4 Nevada caucuses “dialing for dollars,” trying to raise money. Those reports didn’t make headlines; they were buried deep in longer articles (e.g. a Feb. 2 Washington Post story) but I noticed them and was puzzled. Given that Gingrich had out-raised Rick Santorum more than 10-to-1 in the third quarter of 2011 (Newt $9.8 million, Santorum $924,000), and Gingrich had raised $5.6 million to Santorum’s $4.5 million in January, this seemed bizarre. Why this evidence of financial desperation at Team Newt, while the Santorum campaign — which had raised far less money up to that point — showed no sign of a cash crunch?

Subsequent reports have clarified the picture: Gingrich’s contributions, which had surged before and immediately after his Jan. 21 win in the South Carolina primary, declined noticeably after he stumbled in the Jan. 23 debate in Tampa and the Jan. 26 debate in Jacksonville, then fell dramatically after he lost the Jan. 31 Florida primary by 14 points. We didn’t know that until after the February FEC reports were published March 20, but there was a telltale clue in the silence from Team Newt in early March. The Santorum campaign announced on Feb. 29 that they’d raised $9 million in February, and a few days later, Romney’s campaign said Mitt had raised $11 million in Febuary, but you could hear the crickets chirping at Gingrich HQ, as far as finances were concerned. So on Tuesday, March 13, I suggested two important questions:

Question 1: How much did Newt raise in February? Question 2: What was his campaign’s cash-on-hand and total debt as of March 1?

Something seemed very suspicious about the situation, and those who have closely examined the Gingrich campaign’s more recent FEC reports are now asking some troubling questions:

As the presidential campaign of Newt Gingrich persevered despite no realistic prospect of victory, the former House speaker spent lavishly on the trappings of a more-successful, high-profile campaign, spending more on travel and security in March than Mitt Romney did, records show. . . .
Watchdogs said the fact that the numbers are so high raises questions about whether Mr. Gingrich might be profiting from the funds.
“Hopefully, the Federal Election Commission will do its job and, to the extent red flags are raised by these extraordinarily high travel fees, investigate,” said Paul S. Ryan, a lawyer at the Campaign Legal Center.
Campaigns are required to disclose the ultimate destination of campaign funds, not merely note they are “reimbursements” for unspecified expenses — a requirement that specialists say places the Gingrich campaign’s accounting at odds with federal law.
“It’s clearly illegal to convert funds to personal use, and the disclosure requirements are intended to enable enforcement … but we don’t have that disclosure,” Mr. Ryan said, noting that it would take an audit to determine whether Mr. Gingrich was profiting from the $271,000 he was paid. . . .
[Gingrich campaign spokesman R.C.] Hammond said the $1.1 million debt to Moby Dick Airways, reported as “incurred” during March, actually covered a longer time, despite the fact that the campaign has reported a running and steadily increasing tab with the airline each month.
If true, that practice has mischaracterized the campaign’s standing for months, making Mr. Gingrich seem more viable than he was early in the campaign and allowing the campaign to suddenly plunge deeply into debt later.
Mr. Ryan said such back-loading also violates FEC rules, which require goods and services to be recorded as debts or expenditures during the month the campaign benefited from them — “not when a bill is received.”

Read the whole story by Luke Rosiak at The Washington Times.

While I had suspected the Gingrich campaign of mismanagement, it hadn’t occurred to me that they might actually be violating federal law, and this suggestion that Newt himself was skimming the till — well, let’s hope that’s not true. Otherwise, the “Road to the White House” could become the “Road to Federal Prison.”

(Hat-tip: Lisa Graas on Twitter.)

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Comments

  • http://twitter.com/esam7921 bobc15

    You are saying Newt did something crooked.  If you have the proof you should file charges against him.

  • JeffS

    If you are going to read between the lines, try not to exaggerate. 

    Stacy is speculating that Newt is up to funny stuff, based on his odd financial activities, and suggesting that Newt should be investigated under campaign finance laws. 

  • robertstacymccain

    You are saying Newt did something crooked.

    I am saying no such thing. The lawyer at the Campaign Legal Center — quoted in the Washington Times story — says there appear to be reasons to request an FEC audit.

    What I have said is that Gingrich’s campaign was mismanaged  — not a crime, just poor decision-making. This Washington Times article, however, strongly suggests that an FEC investigation could show more serious problems.

  • http://twitter.com/richard_mcenroe richard mcenroe

    That wasn’t a campaign, Stacy.  It was… uh… history lectures, yeah, that’s it…

  • http://twitter.com/richard_mcenroe richard mcenroe

     So the FEC has no jurisdiction.

  • robertstacymccain

    I’m not speculating now, Jeff, except insofar as what the Washington Times story suggests.

    However, when the February FEC reports were published March 20, I’m pretty sure I suggested the possibility that the Gingrich campaign was not fully disclosing its debts. That suggestion was not mere speculation, however:

    1. The proverbial “sources close to the campaign” — not on the campaign, but “close” to it — had told me that Team Newt would report “millions” in debt for February, but when the FEC report was actually published, their cash on hand total was just a little short of their debt.

    2. Everybody in the game knows that  it is possible for a cash-strapped campaign to delay billing by consultants and vendors past the end of an FEC reporting period. Such methods may not be strictly legal, but it’s very hard to prove such a violation.

    If a fundraising consultant, for example, is contractually agreed to a certain percentage of the revenue he generates, that percentage is not necessarily known to the FEC. So you “slow pay” the consultant and don’t report the owed commission as debt until the next reporting period, thus concealing the true extent of your debt for more than three months (in the case of quarterly reports)  or seven weeks (in the case of monthly reports, as three weeks elapse between the end of the month and the next FEC reporting date).

    That kind of stuff happens, and everybody in the game knows it, but the public knows very little about it, because it’s so hard to prove that it’s almost never prosecuted by the FEC.

  • http://www.thecoffeeshopblog.net/ Rose

    I, for one, would buy that book, sir. 

  • M. Thompson

    Veddy interestink, no?

    It just shows what a swamp political campaigning is.  Makes you not want to even run for say, school board.

  • http://casualprofundity.wordpress.com/ elaine

    This is part of how politicians turn a government salary into a personal fortune worth millions…

  • robertstacymccain

    All sorts of stuff goes on in campaigns that never gets reported, much less investigated. But when the candidate reimburses himself $271,000 for travel expenses — well, I just hope for Newt’s sake that he’s got a shitload of receipts stashed somewhere.

  • http://twitter.com/jslconsulting John LaRosa

    The FEC should investigate this matter and report its findings.

    Clearly, Newt did not call William Shatner for the best airline rates. That is not a crime. But if he or his team intentionally broke campaign finance law in order to manipulate the perception of viability, this could get really ugly really fast.

  • http://profiles.yahoo.com/u/EU5DQWQTTHTPO4A4ZYSL3AAV2U Adjoran

    Over $1 million spent on Callista’s travel and security.  That doesn’t count when she was with Newt!  That’s her separate travel and security. 

    Some people just don’t feel safe without their spa days.

    I disagree that the burn rate or lack of actual campaign activity on the part of Gingrich was something not covered – it was reported early on that Gingrich planned a “free and earned media campaign” without the traditional organization, witnessed by the time he and Callista spent in California, supposedly raising money, while everyone else was in Iowa, New Hampshire, and South Carolina last fall and winter. 

    It was noted that he took a private jet on short hops, even such where a car ride would have made it to the next event on the schedule faster.  The 5-star hotels in places that wouldn’t vote until near the end of the campaign were also noted.

    I think there is real trouble on this whole “reimbursement” deal – you cannot just claim a broad category of expenses, they MUST be enumerated, with exact amounts, specific recipients, and proof of payment.  In fact, spending your own money on your campaign is NOT allowed if you intend to take a reimbursement for it later UNLESS you list the expenses as “campaign loans” at the time they are incurred – and “at the time” means in the same reporting period.

    FEC enforcement is ridiculously lax, though, and very slow.  The most likely outcome is a fine and reprimand for Gingrich sometime after the 2014 elections.  If he fights it tooth and nail and is willing to spend some legal fees to do it, it could drag out past 2016.

  • TR

    I have not seen one word on the $450,000K that Rick owes his consulting firm.  In fact I think I read somewhere that the same PR firm that ran his operations in PA, did his “walled off” pac promotions for F. Friess.  FEC anyone? 

    Count them up Stacy?  Most of your Newt stories are filled with rehash of older RSM stories.  I suppose that is one way to add links?  How many stories on the money and the reasons why Rick left before PA? and how much “outrage” about why he has not yet endorsed Romney?

    Is this the Neutral Objective Journalism that you are talking about?  I am just pointing out that the bash-rehash-bash again on Newt is your raison d’etre and this  Newt supporter is just tired of that reveling you seem to be enjoying in the last 20 or so posts on the topic.  (see Legal Insurrection for an astute analysis of the goodbye Newt from Hot Air and the moderate but kind words that Jacobson himself wrote).  In fact Jacobson was also in the hunt with you too in NY23 but he did not carry the life altering resentment that you have about Newt from that experience.

    The problem is not the facts nor even the endless repetition.  It’s your own admission in previous replies that you suffer from a grudge against Newt and that just blows apart the whole neutral objective lie you keep repeating.   The fact that you feel the need to spend two paragraphs in apology to start out this story must be saying something?

    Outside of that, carry on McDuff.  Life is short and we just sometimes observe and smile.  I read your work because you are trying, you are a good writer, and that is a good thing!

  • http://twitter.com/richard_mcenroe richard mcenroe

     TR are you saying you don’t believe Stacy will cover it if the FEC finds irregularities in Santorum’s campaign?

  • JollyMan

    I’m amazed people thought Newt Gingrich was anything BUT a con artist.  Conservatives can be such cheap dates, yell at a reporter or two, and suddenly you should be the nominee for President.

    What’s even more rich is Newt basing his campaign on Romney being unsuitable for the nomination for supposedly being some modern version of Gordon Gekko when in fact Newt was the embodiment of this type of character with the over the top extravagance and possible embezzlement and fraud.

    The fact that Newt’s finances are in shambles and will likely be bankrupt couldn’t happen to a better guy.  My guess is Calista will be leaving as soon as they come to repossess the jewelry.

     

  • TR

    From the Lehigh Valley Morning Call:
    Coordination between campaigns and super PACs has been blurred this
    whole election cycle. Foster Freiss, a major backer of the super PAC
    supporting Rick Santorum, stood on stage with Santorum at a campaign
    event….

    Ryan said it
    is one area where the law is “porous.” While the Supreme Court in its
    Citizens United case contended that because unlimited corporate money
    would be separate from a campaign, there’d be no risk of corruption,
    Ryan said, “The law accommodates very close relationships.”None of the laws here make any sense,” Ryan said. “The law itself was written in a vacuum void of any political reality.”
    — Colby Itkowitz

    I am saying Stacy has overcovered Newt and I haven’t seen much about Rick who obviously has financial issues also.  The WashTimes story says nothing about any actual FEC investigations and in fact the same Paul Ryan from the Wash Times story “raises questions”  about Rick Santorum also in the item from 4/21 above.  So did you see this tidbit on RSM site?

    What is left out is often as important as what is left in.  And sure Stacy will no doubt cover any actual FEC investigations but so far there are none that have been presented. 

  • Adobe_Walls

    I suspect it would have to be extremely outside the norms for a case to go anywhere. Not to say that everybody does it but don’t they? I don’t know much about campaign finance law but since it’s regulated and enforced by the government I’m sure it’s way over complicated and subjective enough that everyone violates something.

  • Adobe_Walls

    You gotta admit that if there were (and there should be in every republican administration) an office of media bashing Newt would be the guy to head it.

  • http://profiles.yahoo.com/u/EU5DQWQTTHTPO4A4ZYSL3AAV2U Adjoran

    There is and will be no official FEC investigation until after the election, until the cycle is over any report can be amended.  They wait until that last chance to disclose the truth is passed.

    While there may be borderline stuff that occurs in most campaigns, I’m pretty sure the level of personal reimbursements claimed, and amounts paid to companies owned by immediate family members, is unprecedented.

  • http://twitter.com/richard_mcenroe richard mcenroe

     He’s not reading between the lines, he’s writing between the lines.

  • http://thepagantemple.blogspot.com/ ThePaganTemple

     I have not seen one word on the $450,000K that Rick owes his consulting firm.

    That HE owes THEM? You mean somebody actually advised him to say some of the stupid shit he said? Hell if anything he ought to get a full refund and then some.

  • http://twitter.com/richard_mcenroe richard mcenroe

     Watching the Gingrich supporters realize they’ve been bamboozled is not going to be nearly as much fun as it ought to be, because many of them have worked like hell on behalf of their candidate and their commitment needs to be acknowledged.

    I doubt Newt’s done screwing them over yet though.  I look for the man who once religion-baited Romney’s supporters to become his biggest cheerleader.

    Newt Gingrich, the Golden Calf of conservative politcs.

  • http://thepagantemple.blogspot.com/ ThePaganTemple

     Well, any campaign is liable to run into debt problems. Even some winning campaigns can find themselves in red ink temporarily. I think the point about Newt isn’t so much that he’s in debt, but so damn much in debt, and even more important that that, how he dug that hole for himself. The extravagant travel itinerary, private jets, five star hotels, the five to seven car motorcades. It seems to have all been a sham for appearances sake, a way to foster the illusion that his campaign was doing well financially in order to encourage more donors, and probably to appear “presidential”.

    Santorum, by contrast, tried to make every dime count. And this is coming from a person who for a while was a Newt supporter over Santorum and Romney, until it became clear Newt’s campaign was no longer viable, if it ever was.

  • Pingback: RSM Still Obsessing on Gingrich Debt | Daily Pundit

  • M. Thompson

     Travel fraud claim.

    It’s common enough, but it’s a great way to through yourself under the bus when you get caught.

  • http://profiles.yahoo.com/u/EU5DQWQTTHTPO4A4ZYSL3AAV2U Adjoran

     It’s not so complicated:  you list all the donations, and you list all the expenses. 

    I assure you most campaigns do NOT get away with listing large amounts of cash “reimbursements” without the paperwork to back it up.

  • http://thecampofthesaints.org Bob Belvedere

    I would too and I think it would help many understand campaign dynamics better, allow them to see through the surface michegas.

  • http://912member.blogspot.com/ just a conservative girl

    I have a friend who worked on the campaign.  It was poorly managed.  Very poorly.  It may not have been the only reason he lost, but it certainly was part of it.  

  • Wifeymommyme

    …unless you’re democrats….

  • K-Bob

    You should write that book.  It would probably involve a few well-crisped bridges, but it would shine some well-needed light into dark areas.

    I wasn’t exactly a Newt supporter so much as I was supporting the-last-conservative-standing, whoever it might be, and I argued for *all* of them against both the carping backstabbers on the right, and the idiots on the left.   I still think too many on the right allowed grudgeholding and stupid representations about “negatives” (which are ALWAYS creatures of the media, no matter how bumbling the candidate may be in real life) to drive all of the conservatives out of the primary.  From that perspective, I’m happy to bear a grudge against all who engaged in that weak sport, since it greased the skids for this year’s version of the McCain campaign. (I don’t bear grudges well, since they require maintenance, but bear it I shall.)

    Sure.  Campaigns need to be well-run**.  Yeah, fine. But in this environment, that only means something if you start “running” six years before you plan to actually “run,” like Romney, and have all the big-money “elites” in your pocket, to go with your own millions.  (By definition, Tim Pawlenty had a “well-run” campaign. Didn’t. help. a bit.) “Well-run” is a lot like the outcome of a poker game.  If you won it all, it was “well-run.”  If you didn’t, you suck, your game sucks, and everyone associated with your game sucks.

    Look: the primary isn’t the general.  The “stupid party” can’t ever seem to learn that, and ought to have it tattooed on their foreheads.  And by “tattoo,” I mean in the percussive maintenance mode.  Even with average “operatives” and a flawed candidate (which is ALL we ever get), the general is won by entirely different tactics than the primary.  So the criticisms about who’s primary campaigns were well-run is like watching two guys argue about the relative comparison of brands of motor oil.

    Romney was going to take this thing unless the Tea Party (and anyone else sympathetic to their generalized aims) stood firm.  They didn’t, so he won.  It’s that simple.  How well any of the campaigns were run doesn’t register with voters one bit.

    Let’s just get past this disaster and hope the next one isn’t as bad.

    **(Yes, I know about “handling the bimbo eruptions,” having enough money, etc. Doesn’t matter. About the only tactic that works against *any* of that crap is to soldier on.  That’s it.  There’s no magic formula.  Just backbone.  It’s how Obama sails serenely onward, after all.  He’s an idiot with enough self-delusion to stand tall and act like everything’s going his way.)