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Watchdog: Follow the Money

Most troubled PAC in history flies under radar, squanders Democratic donors' cash

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Politics,Watchdog,Democratic Party,Campaign Finance,2014 Elections,2016 Elections,Campaigns,Luke Rosiak,Follow the Money,FEC

A PAC called 21st Century Democrats has raised $5.3 million since 2009, but not a penny of it has gone to candidates' campaigns or independent expenditures on their behalf, according to Federal Election Commission records.

That makes 21st Century Democrats one of the largest, yet least effective, independent political action committees in the country.

I have no sense of giving them the approval to use my name, and I suspect none of the other people who they purport to be their advisory board will, either.

The fly-by-night group has tried to represent itself as something more official by presenting a list of respected Democrats as its "advisory board," complete with fabricated quotes, when they hadn't even heard of the organization, the Washington Examiner found.

21st Century says it was founded by Sen.Tom Harkin of Iowa in 1985 and was previously known as the official-sounding "Democrats 2000."

Its web site names no staff and instead lists an "advisory board" including former Sen. Carol Moseley Braun of Illinois, former Labor secretary Robert B. Reich, and David Wilhelm and Don Fowler, former Democratic National Committee chairmen.

In reality there is nothing official or party-sanctioned about the group.

"You're going to have to tell me what that is, because I've never heard of that name," Fowler said. "I have no sense of giving them the approval to use my name, and I suspect none of the other people who they purport to be their advisory board will, either."

Rebecca Boles, a spokesperson for former Clinton Labor Secretary Robert Reich, said: "He has never even heard of that group. They never consulted with him about using his name. He thinks it's pretty outrageous." The political group's web site quotes Reich as saying

"The work of 21st Century Democrats has never been more important."

When asked if she had any knowledge of the group, Moseley Braun, whom it also depicts next to an apparently fabricated quote, said: "Absolutely not! I am sorry to learn about this. Good for you on exposing a scam."

Harkin's spokesman did not respond to a request for comment on the senator's relationship with the group.

The 21st Century Democrats' telephone number is disconnected, and no response was received to an online message.

But payment records 21st Century Democrats filed with the FEC two weeks ago indicate that the PAC is staffed by executive director Jennifer Petty; Gail Martin, who comes from ASC Services, a company that profits off of politics by selling transcripts; and Sara Yankura, whose career has been in fundraising, according to her LinkedIn profile.

The 21st Century Democrats' bare-bones website claims it invests "in some of the most competitive races as well as in some of the most challenging ... We focus the bulk of our resources on electing challengers and protecting vulnerable incumbents."

The reality is that the only significant recipient of the PAC's funds was Integral Resources, a Cambridge, Mass. dial-for-dollars telemarketing firm that received nearly $2 million since 2009.

Other major clients have employed Integral Resources; the Democratic Congressional Campaign Committee has paid it $22 million since 2009, and it was paid $9 million by President Obama's campaigns, mostly in 2008.

But the DCCC sent tens of millions of dollars to candidates, and Obama used the funds to power his own historic campaign.

21st Century's "investment" in campaigns appears to amount to posting the names and pictures of well-known Democratic incumbents like former San Diego Mayor Bob Filner and Sen. Sherrod Brown, D-Ohio, on its website as "endorsements."

In FEC disclosures, 21st Century Democrats reported that it paid Petty $118,000 over the last two years, while Martin was paid $62,000 over 18 months.

Those are relatively small sums, but based on the PAC's minimal activities, there are no indications that Petty or Martin performed full-time work.

And they are all that is left over for an organization willing to ask for money even though its reliance on expensive telemarketing means that almost all of the contributions it receives will be spent on overhead.

There are typically two purposes for a PAC: To act as a middleman to gather contributions and direct them to candidates' campaigns, or, in the case of the newer "super PACs," to run ads themselves advocating for or against candidates.

For more than five years, 21st Century Democrats has raised funds while doing none of either, and there is no information suggesting the PAC plays a significant role in grassroots events, organizing or other political activities on behalf of candidates, as it once did.

Yet, despite spending nothing on political races, 21st Century Democrats has somehow managed to not pay vendors, accumulating debts so great that interest payments alone are staggering.

Among the PAC's $217,000 in debts are the $3,250 it owes Georgetown University; $13,000 to a web design firm; $20,000 owed to lawyers and $18,000 to accountants; and $40,000 to telemarketing firm Gordon and Schwenkmeyer, even as it routinely pays that firm's competitor, Integral Resources. All of these debts are many years overdue.

The PAC's treasurer for most of its history has been a 70-something retiree named Bill Combs, who has not previously served as treasurer of any other political groups, and whose son was also paid by the PAC.

Between 1996 and 2004, other treasurers filled in, including Michael Lux, a special assistant to President Clinton, in 2004.

Perhaps what is most surprising is that the group has escaped condemnation from Democrats, despite a lengthy history of campaign finance violations.

Few have even heard of the PAC, which raised more than $600,000 last year, yet an Examiner analysis of FEC records shows it has been dinged by FEC analysts 229 times, more than any other committee.

In 2005, the FEC found "reason to believe that 21st Century Democrats and Michael Lux, in his official capacity as treasurer ... violated" the law "by using prohibited funds" in accepting $300,000 from a Democratic lawmaker in Minnesota -- the maximum allowed was less than $5,000 -- and using it to drum up votes for then-Democratic presidential candidate John Kerry.

At the time, 21st Century was under different leadership and a much more active group, largely because it also had a 527 group, a sort of predecessor to what is now known as a super PAC that could accept unlimited contributions.

Officials claimed the money was for a nonpartisan get-out-the-vote effort under its 527 section that wouldn't be subject to FEC limits, despite public proclamations by its leaders that the goal was to unseat President George W. Bush.

But "21st Century Democrats' references to candidates Kerry and Bush would not qualify as 'generic' voter drives," the FEC found.

The PAC paid a $190,000 penalty to the state of Minnesota.

A later audit of that time found that the PAC "failed to maintain copies of contributor checks and credit card documentation for contributions from approximately 37.5 percent of contributions from individuals in excess of $50."

The same audit also found that the PAC "failed to report most of its debts and obligations,” including more than $600,000 to one vendor, direct-mail firm OMP.

But auditors noted that their ability to identify problems conclusively was limited by the lack of records. That time, the PAC agreed to pay a $24,000 fine.

In subsequent years, 21st Century Democrats routinely ignored "requests for additional information" — letters from FEC analysts flagging apparent improprieties.

"The committee responded inadequately or provided a late adequate response to 23 of 49 RFAIs sent in the 2005-2006 election cycle," FEC officials wrote in a case concluded in 2009.

The RFAIs raised questions about problems such as "Excessive, Prohibited and Other Impermissible Contributions or Transfers" and "Mathematical Discrepancies."

In February 2009, the FEC brought proceedings against the PAC due to the "cumulative nature of deficiencies on reports filed with the commission.”

"Respondents acknowledge reporting deficiencies, but contend they made significant changes by revising and formalizing internal financial procedures to improve compliance.

"Respondents also retained the services of Political CFOs Inc., a vendor experienced in compliance with [campaign finance law], who conducts monthly reconciliation of the committee's financial records," according to FEC records.

21st Century Democrats agreed to "a) develop a quarterly compliance training program for committee staff and b) pay a civil penalty of $2,500."

But FEC records indicate that the PAC's payments to Political CFOs Inc. stopped just months after giving that assurance to the FEC. The payments amounted to less than $6,000 overall.

In October 2010, 21st Century Democrats simply didn't file one of the most election-sensitive reports of the year despite $74,736 of activity. It was fined $3,300.

In May 2012, the FEC decided by a "vote of 6-0 to 1) find reason to believe that 21st Century Democrats, and Combs, Bill as treasurer violated" the law by filing a $556,147 report 15 days late. The commission fined the PAC $8,000.

The 527 side of the group was funded by unions, and wealthy liberals including George Soros, investor Andrew Rappaport and now-deceased energy executive John Haas.

That fund is now inactive, and the vast majority of its PAC donors are a very different type — those giving just a few dollars at a time, normally after receiving a call from a telemarketer and likely having little idea exactly what "Democrats" group they were giving to.

But 21st Century Democrats' overarching flaw is beyond the FEC’s purview: the abrogation of the trust of thousands of donors who were interrupted at dinner by telemarketers seeking their hard-earned money after being led to believe that their dollars would help the party's candidates win elections.

Donors like Wendelyn Anderson, a retiree in Cottrellville, Mich., who gave $240 in $40 increments.

“Someone called who knew everything to say that was sympathetic to the goals that I have, so I was agreeing with him, even though I knew he was a paid telemarketer. Obviously they called me a lot because I don’t give that much money at one time,” she said.

“I thought [candidates] were getting some of it. I don’t want to just be paying for someone’s free dinner. I’m insulted, even though I fell into it. Just because I’m retired doesn’t mean I want to be taken advantage of,” Anderson said.

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