A well-connected Republican political fundraising group faces scrutiny by state and federal officials for a series of financial transactions that have been characterized in one formal complaint to the Colorado Secretary of State as a money-laundering scheme.
Last week, Colorado Confidential compared the IRS records of “527 political committees” – the term used to refer to the IRS tax code chapter that regulates them. This report focuses on a set of curious transaction between the Senate Majority Fund, LLC, and the influential Trailhead Group, LLC, founded by beer baron and former US Senate candidate Pete Coors, Governor Bill Owens, and oilman Bruce Benson. Our investigation revealed $100,000 in unaccounted money transfers between the two organizations.
Unfortunately, Enron-style accounting practices appear to be an established pattern among some Republican 527s groups in the state linked to Trailhead.
The Senate Majority Fund never reported to the IRS receiving any of the $25,000 that Trailhead says it contributed. Neither does the Fund acknowledge making a $55,000 contribution to Trailhead one day after it was supposed to have received $20,000 from Trailhead. In fact, the Senate Majority Fund never reports receiving one thin dime from Trailhead in this reporting period or ever in its existence.
So, why would two seemingly independent and successful fundraising operations like the Senate Majority Fund and Trailhead report sliding tens of thousands of dollars back and forth to each other, once within 24 hours, while never reporting the transactions on the corresponding recipients’ IRS reports? We aren’t quite sure.
According to Steve Weissman, Associate Director for Policy at the non-partisan Campaign Finance Institute in Washington, DC, he couldn’t remember an instance when 527s didn’t account for the money transfers to and from each other. In an interview with Colorado Confidential reporter Jason Bane, Weissman said, “If they are not listing these transactions, that is against the law. It’s called not filing an accurate report, and that’s something the IRS should be enforcing.”
While Trailhead is the better known and perhaps more influential group due to its high profile founders and donors, the Senate Majority Fund is no slouch itself. Compared to the $1.8 million that Trailhead has raised since last year, the Senate Majority Fund has brought in more than $1.3 million, most of which are donations in the $500-5,000 range in what fundraising operations call “churning” or returning to the same donors over and over again. The group has also poured over $900,000 into Republican political causes since its inception three years ago.
Shires, who registered the Senate Majority Fund with the IRS on June 24, 2003, has served as its manager for the last three plus years. He has filed seven reports with the IRS for this group so a “rookie mistake” as an excuse to account for the money transfers stated by Trailhead seems an unlikely explanation. Like any tax-exempt group, 527s are legally required to account for every contribution and expenditure on a quarterly basis to provide strict accountability to the public in the collection of the funds and the political activities they are engaged in.
Repeated calls to Senate Majority Fund manager Scott Shires for comment have not been returned.
On Monday, based on our investigative reports, Colorado Citizens for Ethics in Government (CCEG) filed a formal complaint with the Internal Revenue Service alleging that Trailhead, the Senate Majority Fund, the Colorado Leadership Fund and the Colorado Good Government Initiative had violated federal tax laws by failing to fully report their contributions and expenditures. Colorado Confidential reporter Erin Rosa covered the story here.
The Colorado Leadership Fund and Colorado Good Government Initiative were the subject of Colorado Confidential investigative stories here and here.
Meanwhile, Aaron Fink, a Boulder resident, retained counsel to file a separate complaint with the Colorado Secretary of State [PDF] alleging that Trailhead, the Senate Majority Fund, and Colorado Leadership Fund were engaged in a money laundering scheme to evade campaign finance laws. The Colorado Constitution prohibits the use of contributions from corporations and labor organizations to candidates. The complaint asserts that by trading corporate contributions with one another, Trailhead and the other 527s attempted to obscure the original sources of the funds so that may be used for electioneering communications. Also according to the complaint, the penalty for such activities is a fine of three to five times the amount of illegally transferred funds. The fine is levied on the fund and, possibly the corporate/labor contributors, if they had knowledge that their money was being used as part of the scheme.
If the allegations are proven true that means that Trailhead and the Senate Majority Fund faces fines of up to $500,000.
To date, the Senate Majority Fund has not updated its records on the IRS public disclosure website. Unlike the recent actions of the Colorado Leadership Fund that suddenly amended its filing with the IRS to account for $100,000 in previously unreported contributions and expenditures with Trailhead. The revision came less than three hours after Colorado Confidential’s initial story was posted on September 15 about Trailhead’s curious transactions with other 527 committees.
