A dark money lawsuit, a colorful cast of characters, and Colorado’s citizen campaign finance cop

It sounds like the beginning of a joke: A former GOP congressman, a Koch-connected talk radio host, a pastor who once conducted an exorcism of Barack Obama’s “demons,” and a journalist-turned-political-consultant-turned-journalist-again walk into a tiny fourth-floor courtroom in downtown Denver.

But no one was laughing last Wednesday morning when former Republican U.S. Rep. Bob Beauprez, KVOR radio host and consultant Jeff Crank and others lined up as witnesses in a state administrative law court. Also on the witness stand were online evangelist and former state lawmaker Gordon Klingenschmitt and Dan Njegomir, a blogger for the recently launched ColoradoPolitics.com website of The Gazette newspaper.

For two days, each of them testified under oath in a hearing before Judge Robert Spencer that laid bare the unique nature of Colorado’s system of enforcing campaign finance laws. It’s a case that attempts to shine a narrow beam of light into the murky world of dark money by seeking to force a group to disclose its secret donors and activities. The case, which focuses on the inner workings of a political nonprofit and a related group that got involved in a Republican primary last year, also exposes a bitter rift between Colorado’s Republican establishment and a more extreme strain of the GOP.

Peering out over a long wooden bench, his thin frame swimming in a long black robe, Judge Spencer took in the scene before him.

“This,” he said, “is going to be a long, agonizing case.”

***

Dark money is money spent in politics where the source of it remains, well, dark. Untraceable. Unknown except to those want to keep it that way.

One example is money raised by some nonprofits and transferred to political committees to try to influence elections.

Nonprofit 501(c)4 groups, which include “social welfare organizations,” don’t have to disclose their donors. And they can raise unlimited amounts from people, corporations, unions, and other nonprofits. Such groups can get involved in politics, but the major purpose of their work cannot be to support or oppose candidates in an election.

Groups that do have a major purpose of influencing an election by supporting or opposing candidates, like Independent Expenditure Committees, or IECs, are required to disclose their donors. So, if a nonprofit social welfare organization gives money to an IEC, the IEC can disclose that it took money from that (c)4, but the source of the funds are still – you got it – dark.

‘Friends and enemies’

The scenario that brought this cast of characters together last week — and the way the proceedings were carried out — would not likely happen quite the same way in any other state.

In most states, if a politician or political group is believed to have run afoul of campaign finance law, a government panel or commission would screen an official complaint. An attorney general, an ethics agency, or the state police might investigate. 

In Colorado, anyone who lodges a complaint about a suspected campaign finance violation has to prove his or her own case against an alleged violator in a courtroom setting that at times can feel like a full-blown trial. It’s a system its critics say discourages average citizens from bringing complaints against powerful people or well-funded groups. But if you do file a campaign finance complaint and go to court, you can subpoena witnesses and gather evidence. You can question and cross examine people on the witness stand just like in a scene out of A Few Good Men or My Cousin Vinny.

The system that fosters this in Colorado is called private party enforcement — also known as third-party enforcement. Created under the state’s Constitution, it is essentially a system by which the government outsources enforcement of the state’s campaign finance laws to the public at large. 

Because of this set-up, the state of Colorado is currently facing a pending federal lawsuit from a Washington, D.C.-area legal nonprofit that attacks Colorado’s private-party enforcement system as unconstitutional. The nonprofit law firm Institute for Justice claims such a system “empowers political insiders to silence any ordinary speaker they disagree with.” The law firm represents a Colorado mom who was sued twice by her local school board after she placed ads in her local newspaper to alert readers to the upcoming board elections.

Just how unique Colorado is in enforcing campaign finance law through the private sector is evident in interviews with state and national groups that work in the arena of money in politics.

“In all my work on campaign finance issues I’ve never heard of another state where this is as widespread a problem as it is in Colorado,” says Paul Sherman, senior attorney at the Institute for Justice.

“There’s just really nothing like Colorado,” adds Tyler Culberson, a former Federal Election Committee staffer who is now at the Campaign Finance Institute studying how different states operate. “As far as I am aware there isn’t a single other state that enforces campaign finance laws like that.”

Luis Toro, director of Colorado Ethics Watch, says the state would be better served “having a professional agency like they have in California or Montana that administers these complaints rather than outsourcing it.” 

On the flipside, the system might save the state money by not having to hire paid investigators, and it does empower average citizens to go up against powerful insiders. For instance, when someone files a campaign finance complaint in Colorado, that person can act as a prosecutor even if they don’t have a law degree or any training as a lawyer.

And that’s how a congressman, a talk radio host, an ex-lawmaker pastor and a politics writer ended up in court last week. They were witnesses, all brought together by yet one more colorful character in Colorado politics: Matt Arnold.

Arnold is a straight-backed, square-jawed Army reservist in a crew cut who is not a lawyer and did not go to law school, but who has prosecuted more campaign finance complaints in courtrooms across Colorado than anyone else. He has filed more than 50 complaints in just the past few years, according to a state database that tracks them. More than five are still pending.

“I have successfully prosecuted more campaign finance violations than anyone in Colorado,” he boasts.

Arnold, 50, calls himself a “libertarian-slash-Constitutionalist.” He is hailed by his supporters as an altruistic ethics watchdog who fights for enforcement of the state Constitution and Colorado’s Fair Campaign Practices Act. To his critics he is something else: a gadfly with an ax to grind who uses the state’s private-party enforcement system to settle personal scores in court on behalf of his limited liability company, Campaign Integrity Watchdog.

“It’s made me both friends and enemies,” Arnold says of his work in Colorado politics. “Probably more the latter.”

‘Not a simple inquiry’

In June, Arnold filed a complaint against a nonprofit 501(c)4 called Colorado Pioneer Action. At the time he said it “may be the campaign finance case of the year in Colorado.”

Colorado Pioneer Action is run by Bob Beauprez, a high-profile Republican who ran for governor in 2014 and once chaired the state GOP. As a (c)4 nonprofit “social welfare organization,” Colorado Pioneer Action does not have to disclose its donors, but its major purpose cannot be to support or oppose candidates in an election. Arnold is seeking to show the group’s major purpose was to do just that in the 2016 elections. For that reason, his complaint says, Colorado Pioneer Action should have been registered as a political committee and so should disclose its donors and financial activities. Beauprez disputed Arnold’s characterization, testifying under questioning by Arnold and Beauprez’s own attorney that the nonprofit group is about bettering Colorado’s long-term economic landscape by furthering conservative ideas and principles. Part of that goal, Beauprez said, has to do with who gets into public office.

Arnold used the hearing to lay the groundwork for his accusation that Colorado Pioneer Action was able to improperly influence some of last year’s elections, including a state Senate primary race between Gordon Klingenschmitt and Republican Bob Gardner. Klingenschmitt, who was a state House member at the time, lost in a landslide. The lawmaker frequently made national news, like The Daily Show, for controversial comments. He once said, for instance, about openly gay Democratic Congressman Jared Polis of Boulder, “The open persecution of Christians is underway. Democrats like Polis want to bankrupt Christians who refuse to worship and endorse his sodomy. Next he’ll join ISIS in beheading Christians, but not just in Syria, right here in America.” As far as Obama goes, Klingenschmitt said he believed he was possessed by a demon of tyranny.

Klingenschmitt has blamed his state Senate defeat in part on a dark money smear campaign. Negative ads against him filled mailboxes in the district. Klingenschmitt believes money spent on them was raised by Colorado Pioneer Action and not disclosed.

Beauprez’s lawyers from the powerhouse Denver law firm Holland & Hart sought to get Arnold’s complaint dismissed, but a judge in September declined to do so.

Beauprez declined to comment about the case while it is pending.

In recent months, Arnold had delivered a flurry of subpoenas to Beauprez, people who did work for his nonprofit, and others who were contracted as vendors for Colorado Pioneer Action and its related groups such as an independent expenditure committee, also run by Beauprez, called Colorado Right Now. The nonprofit is still up and running, but the committee has been shut down.

Relying on information he gathered from those subpoenas, Arnold spent hours on Wednesday and Thursday interrogating Beauprez who recently had a hip replacement and sat for hours in a witness box with one foot resting on a small stool.

The room could fit about a dozen onlookers, but only a handful — mostly witnesses — watched on for the two days of hearings.

Dressed in a charcoal suit, Arnold shuffled through stacks of thick binders and scrolled up and down a laptop computer screen at a small table and wooden podium. He might not be an attorney, but he looks and talks like one.

Often the judge would have to rein him in or reprimand him. “I don’t need a lecture,” the judge told him at one point. At another point he sarcastically thanked Arnold for explaining a judge’s role.

Seated on the other side of the room was Douglas Abbott, a gray-haired Holland & Hart attorney for Beauprez. Abbott frequently shook his head derisively at Arnold’s comments or objected to them on legal grounds. At one point Arnold suggested Abbott not get his “knickers in a twist,” which drew a quick rebuke from the judge.

Arnold explained why he had said it: “Mr. Abbott snorted,” he told the judge.

On the stand, Beauprez stressed repeatedly that political work his nonprofit did in 2016 — research, polling, ads, investigations, social media — was to further ideas and conservative principles, and educate voters about public officials. Those public officials just happened to be running for re-election at the time. Beauprez sought to differentiate between the two, with Arnold repeatedly pointing out that a sitting public official who is running for re-election is a candidate.

During parts of his testimony, Beauprez acknowledged that Colorado Pioneer Action had mistakenly run Facebook ads about candidates within 30 days before an election, which he said it should not have done. Running ads within that time frame is what is called “electioneering communication” under state law and a group that runs ads for such purposes would have to register as a political committee and disclose its donors if it spent a certain amount of money.

On Thursday Beauprez was questioned by Abbott, his own attorney.

Abbott asked why he set up both the nonprofit, Colorado Pioneer Action, which doesn’t have to disclose its donors, and the independent expenditure committee, Colorado Right Now, which does. To stay in line with the law, Beauprez responded.

Abbott asked Beauprez why his nonprofit Colorado Pioneer Action was interested in a specific race — a primary between Colorado Springs Republicans Janak Joshi, an incumbent House member, and challenger Larry Liston – Beauprez said he didn’t appreciate the tenor of negative attacks, including cross-dressing allegations, aimed at Liston made on behalf of people close to Joshi. Liston won the seat.

Beauprez said one of the reasons he started his nonprofit was because he felt the quality of state lawmakers has deteriorated in Colorado. Joshi, he said, was one of those lawmakers, and so Beauprez wanted to get involved in the race.

“We engaged and we engaged very aggressively,” Beauprez said. His nonprofit, he added, filled a void in researching and exposing certain public officials who deserved exposing. Beauprez’s IEC, Colorado Right Now, paid for attack mailers in the district.

“Did you believe that CPA had the right to inform the public about Mr. Joshi’s activities without becoming a political committee under Colorado campaign finance laws?” Abbott asked. Beauprez responded that he thought it was a free speech right to do so.

Abbott asked Beauprez why his nonprofit engaged “in the public dissemination of information” in the race involving Klingenschmitt. Beauprez said it was because he felt Klingenschmitt was “often an embarrassing representative … and I thought we could do better.”

Following the hearing, Abbott declined to give his take on the case other than to say, “It is not a simple inquiry — as simple as it’s been presented by someone else in the room.”

No ‘secret billionaire’

Arnold spent nearly a year researching, gathering evidence and issuing subpoenas for his campaign finance complaint. One might wonder what he gets out of it.

Arnold says he does not get paid for filing complaints like the one he filed against Colorado Pioneer Action, he merely believes in justice. He and his company, Campaign Integrity Watchdog, get paid to keep the campaign finance books in order for candidates and organizations who don’t want to run afoul of the state’s strict disclosure laws — laws Arnold knows well.

One man clearly interested in the outcome of this case, though, is Gordon Klingenschmitt. He hopes a resolution in Arnold’s favor exposes secret funders behind a blizzard of attack ads from Colorado Right Now that he believes helped doom his candidacy for the state Senate in 2016. He wants to know who paid the nonprofit and whether the source of money that was not disclosed funded attacks on him. 

Asked if he ever paid Arnold, Klingenschmitt initially declined to say.

“The man is living on a shoestring and he passes the hat among his friends,” he said of Arnold during a break in the hearing. “He doesn’t have a secret billionaire.”

Pressed by The Colorado Independent, Klingenschmitt said he personally gave Arnold about $1,000. He said his charity, Pray In Jesus Name, might also hire Arnold to make a documentary on this case. Klingenschmitt said that because his nonprofit doesn’t get involved in politics, he would hire Arnold as a “researcher.”

Despite being a registered Republican, Arnold is a frequent thorn in the side of right-leaning politicians and groups in Colorado. Last year, a complaint he filed against the state Republican Party resulted in the party paying a $10,000 fine for violating campaign finance law. The money goes to the state.

When the fine became public last February, the party’s then-spokesman provided The Colorado Independent with an email showing Arnold had been seeking work from the party. At the time, Republican Party Chairman Steve House said, “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 said he was just trying to make sure the Republican Party was taking responsibility, being held accountable, and fixing problems with reporting donations.

More recently, a complaint Arnold filed against the El Paso County GOP resulted in more than $250 in fines because of a handful of errors in the party’s campaign finance reports.

‘Don’t fuss with the witness’

Jeff Crank, a Colorado Springs political consultant and KVOR radio host, took the stand Wednesday. He testified that his firm Aegis Strategic did political work on behalf of Colorado Pioneer Action about candidates who were up for election. Crank once ran for Congress and was the state director for the Koch-backed group Americans for Prosperity.

As Arnold questioned his witnesses, he often steered their testimony into the busy intersection of politics and media.

At one point Arnold asked Crank whether he disclosed to his radio show listeners that he made money working in political races he was also talking about on the air.

Crank said he allows equal time for candidates on his show, and, “My businesses is my business, my radio show is my radio show.”

Later in the day, Arnold called Dan Njegomir to the stand.

A former journalist who became a political consultant and Republican Senate staffer, Njegomir returned to the media business in the fall when he was hired to write about state politics for ColoradoPolitics.com, a new statewide project of The Gazette newspaper in Colorado Springs.

Facing his witness on the stand, Arnold, who found out Njegomir did some work for Colorado Pioneer Action around the time of last year’s elections, wanted to know what kind of work he was hired to do for the Beauprez nonprofit.

“I was hired to do investigative journalism,” Njegomir said from the witness box. He said he researched Klingenschmitt and others such as Joshi.

Njegomir said he produced content about the lawmakers that Colorado Pioneer Action posted online. He stressed that he was hired to look into their conduct as sitting public officials — not as candidates for office — and hold them accountable. He said he was hired to “cover them as journalists would.” For instance, he looked into a charity Klingenschmitt ran, he said, that “we thought over time seemed to raise ethical questions.”

Njegomir said he also worked with an entity called Colorado Government Watch, a group run by a Colorado Springs-area political consultant named Dede Laugesen. Asked if he was paid by that group, Njegomir said he did not know.

The hourlong back-and-forth between Arnold and Njegomir produced perhaps the most fiery exchanges of the hearing. Days earlier, Njegomir had penned a post for ColoradoPolitics.com about how he believed Arnold subpoenaed him in retaliation for unflattering coverage.

***

Early on Wednesday, Judge Spencer sanctioned and admonished Arnold for leaking information to the news media that he obtained through subpoenas in the case — specifically how much money Njegomir made from Colorado Pioneer Action. Arnold had provided that information to The Colorado Springs Independent, the alt-weekly newspaper in Colorado Springs.

“I’m not going to tolerate it,” Judge Spencer told Arnold. He said he did not have the power to hold him in contempt, but if he could he would. Instead, he said Arnold will have to pay some attorneys’ fees he expected would be nominal.

Against this backdrop, Judge Spencer said he would not act as a referee in a personal dispute between Arnold and Njegomir. “Don’t fuss with the witness,” the judge scolded Arnold at one point. “I don’t want you arguing with the witness.”

Arnold asked Njegomir if he was hired to dig up dirt on Klingenschmitt for Colorado Pioneer Action, and Njegomir said that was not correct. He said he was hired to “look into” Klingenschmitt.  Asked by Arnold if Njegomir was aware Klingenschmitt was a candidate for office when he was doing work for Colorado Pioneer Action, Njegomir says, “I don’t remember if I knew that … but it wasn’t germane to what we were doing.”

Arnold pointed out how some checks by Colorado Pioneer Action to Njegomir referenced “SD12”— for Senate District 12, Arnold indicated— the Senate seat for which Klingenschmitt was running, not the seat he held in the House of Representatives at the time.

Arnold repeatedly asked Njegomir if Klingenschmitt and Joshi were “candidates.”  “Knock it off with the candidate stuff,” Njegomir responded, his voice rising, “because part of my stock and trade [was] not getting involved in politics with that project, and you’re not going to box me into it.”

At another point, Arnold quizzed Njegomir on his level of disclosure at the Gazette-produced website ColoradoPolitics.com about his previous work looking into politicians.  

“I am prepared to answer that question and defend my journalistic ethics, but I don’t think that my current job performance or my ethical conduct as a journalist has anything to do with this hearing,” Njegomir said, looking toward the judge.  

How is any of this relevant, the judge asked Arnold. It might speak to the connections between people who paid Njegomir and “who are running these political campaigns and running operations and ads and mailers and everything else to support or oppose candidates in these elections,” Arnold replied.

Judge Spencer was not amused.

“If there’s a tangential connection there it’s lost on me,” he said, telling Arnold to move on.

As the courtroom prepared to close on Thursday, both sides had not yet gotten to their final arguments. Submit your closings in writing, the judge told Arnold and Abbott, giving them more than a week to do so.

The judge could rule within a month.

Before 5 p.m., Spencer left the bench and Beauprez and his attorney filed out the door.

Packing up his binders, Arnold was bullish on the outcome. If he wins, he said, the judge can impose fines and penalties on Beauprez’s group. And, he said, the judge could require the group to file disclosures.

Klingenschmitt, still in the courtroom, asked if it’s possible the public will be able to know the names of the donors who might have been behind a campaign against him. Arnold said he thinks it’s possible.

Njegomir, watching from the back of the room, casually asked Arnold:  “Did I help your case?”

“You did, thank you,” Arnold told him.

And then, without a judge left in the room to stop them, the two traded accusations, each calling the other a liar.

CORRECTION: An errant comma misstated fines paid by the El Paso County GOP. The party paid $250.