Watchdog or bully? How a $10,000 fine led to a GOP blowup

A judge in Denver has fined Colorado’s Republican Party Committee $10,000 for failing to follow guidelines related to disclosing donors.

But behind the fine is a bitter backstory that involves turnover at the state GOP, a fight between new Party leadership and a campaign finance activist, and even the threat of a subpoena to this reporter.

It all started when Campaign Integrity Watchdog, run by Colorado campaign finance warrior Matt Arnold, filed complaints against the state Republicans last fall. He argued they were not disclosing details of their contributors, such as occupations and addresses, as required by state law. In Colorado, the burden of campaign finance oversight is relegated to private citizens who must bring complaints against candidates and political groups. In other states, ethics panels oversee campaign finance.

For the past few years, Arnold has used his Campaign Integrity Watchdog operation as a business that he says holds politicians and their groups accountable because the government won’t. A self described libertarian-constitutionalist, Arnold says his group is “aggressively nonpartisan” and will go after anyone who has run afoul of the state’s byzantine campaign finance laws.

His critics say he abuses the system for his own personal gain.

But no one can argue that Arnold hasn’t had big wins, despite the nature of his complaints. A prime example is the Feb. 24 court ruling on Arnold’s campaign finance complaint against the state GOP. Administrative Law Judge Robert Spencer ruled, among other violations, that the GOP committee failed to list the occupation of Denver billionaire Phil Anschutz, who gave $2,825 last year. Other violations had to do with incomplete information about addresses or occupations of a handful of other donors.

Spencer wrote in his decision that the Republican committee in Colorado has a “substantial history of reporting violations” over the past six years. In court documents, the Republican Party Committee’s director, Ryan Lynch, who until last week also worked as director of the Colorado Republican Party since fall of last year, blamed technological issues in part for the reporting errors. Lynch also said he put protocols in place to catch future errors and the committee has a “duty to get it right,” and ensure reporting errors won’t happen again. He declined to comment for this story.

The judge said he found no evidence the GOP intentionally tried to conceal information about donors. Still, he popped the Republicans for repeated violations.

“CRC is a sophisticated political committee with long experience in campaign finance reporting, and it has no credible excuse for the errors that occurred,” Judge Spencer wrote. “The multiple infractions in this case, together with CRC’s long history of prior violations suggests that, at least until recently, CRC has viewed its reporting obligations with reckless indifference. A substantial monetary penalty is warranted.”

So the judge slapped the committee with a $10,000 fine and made the group return five contributions to donors. The Party says the vendor it uses for campaign finance compliance will pay the fine, not the Party.

Arnold, who brought the complaint, isn’t a lawyer, so he won’t be eligible for attorneys fees, he notes. He enjoys reveling in his campaign finance court victories, especially when he beats what he’s called “high-paid” attorneys in court. In this particular case, Arnold said he extended what he called a “gracious settlement offer” to the Republican Party, which it declined. Arnold would not discuss the details of that offer and whether he would have made money from it.

He blasted the Party for using a Utah-based contractor to handle its campaign finance compliance.

“Clearly, they don’t understand Colorado campaign finance law,” he told The Colorado Independent. “They’re out of state.”

Arnold argues that despite not being an attorney, he knows the law, and has thick case files from his previous court battles to show for it. He declined to say whether he’d want a job doing campaign finance work for the Party. He said his latest victory stems from a complaint he filed under the state Republican Party’s previous leadership, and he’d hoped fresh faces in the Colorado GOP would keep their campaign finance house in better order.

An Army reservist who lives near Denver, Arnold says he just wants to make sure the Party is taking responsibility, being held accountable, and fixing problems with reporting donations. Instead of accepting his settlement offer, the Party rolled the dice in court, he says.

“And guess what? I beat ’em,” he says. “Which they should have figured out by now.”

Responding to the campaign finance violation and Arnold’s complaint, Colorado Republican Party spokesman Kyle Kohli on Wednesday forwarded an email of Arnold’s settlement offer to The Colorado Independent.

Part of the settlement, which Arnold described in writing as a “pretty sweet deal,” included the Party shutting down a Super PAC it runs, paying a company he helped form a lump sum of $10,000 or monthly installments of $3,000 to $4,000 for a campaign finance audit, and paying a likely few hundred dollars in attorneys fees, according to the e-mailed document. Arnold said in his offer that he’d had a previous commitment from the Party to shut down its Super PAC.

Arnold wrote:

I’m willing to offer this generous deal in the interest of avoiding disruption to what is, after all, MY party — albeit a party that has proven less than faithful in fulfilling its obligations to me and mine — in a critical election year. But, Bygones… IF we can reach an agreement. Alternatively, “the beatings will continue until morale improves.” ;-)

About the offer, Kohli sent a statement to The Independent attributed to Colorado Republican Party Chairman Steve House that reads, “This is an individual who claims he’s about ‘integrity,’ but in actuality is more interested in enriching himself at the expense of the Colorado Republican Party.”

Arnold bristled upon hearing that his settlement offer to the GOP had been disclosed to The Independent.

“Legally, I cannot comment on that confidential settlement agreement,” Arnold said. He added that he plans to file a complaint with the Office of Attorney Regulation Counsel about the Party making the settlement proposal public. And, he said if this reporter wouldn’t forward him the document the Party emailed, he’d have it subpoenaed. (Kohli says the Party’s lawyer gave him the OK to send it.)

Arnold said Chairman House had once made a contractual offer for Arnold to do campaign finance work for the Party, on which House later rescinded. He said House commissioned Arnold during an in-person meeting and in written correspondence to do an audit of the Party’s campaign finance compliance. He says House later declined to follow up.

“He just blew it off,” Arnold says.

House says the GOP couldn’t accept Arnold’s “exorbitant terms.”

Now, whatever bridges were already burning between the two sides have blown to bits.

If anything, the situation should shine a glaring spotlight on Colorado’s unique system of private-party enforcement for campaign finance, which, as it happens, is the subject of a pending federal lawsuit. That citizens must prosecute potential violations of campaign finance laws in Colorado is ridiculous, say critics of the status quo. Supporters counter that the system saves taxpayers money.

Republican Party Chairman House accuses Arnold of “abusing” that system.

But for Arnold, the way Colorado currently outsources compliance to the private sector has so far meant brisk business. Indeed, as this story was being reported he was already working on his next complaint.

*This post has been updated. A previous version of this story stated Arnold was an Air Force reservist who lived in Westminster. He’s an Army reservist, who lives near Denver. 

[Photo credit: Mandee Sears via Creative Commons on Flickr]