July 24, 2020
Ohio House Speaker Larry Householder’s $60 million bribery scheme appears to be the biggest scandal involving a dark money group since the Supreme Court unleashed them into American elections with its 2010 Citizens United ruling. One way the group at the center of the scheme, Generation Now, concealed its illegal activity was by avoiding filing its tax returns with the IRS for months, despite repeated requests by CREW for a copy of the form and responses from the group that the filing would be made soon. Now it’s clear that the failure to file and produce the form may well have been part of an effort to conceal an illegal bribery scheme.
Earlier this week, Householder and several Ohio political consultants were arrested on bribery charges related to a 2019 House bill that bailed out nuclear power plants owned by utility company FirstEnergy. Also named as a defendant in the criminal complaint is Generation Now, a nonprofit organization that was used as a personal and political slush fund by Householder. Though the group does not disclose its donors, the complaint alleges it was largely funded by a company revealed by reporting to be utility firm FirstEnergy. The complaint further details tens of millions of dollars in suspicious and illegal transactions.
Top-line figures and many details about the group’s financial information for 2018 should have been made public months ago, but Generation Now refused to file its tax return for that year with the IRS as required by the law. Since annual tax returns are one of the few sources for transparency about spending by nonprofits, Generation Now’s failure to file prevented the group’s shady financial activity from being subjected to public scrutiny long after some of those details should have been revealed.
Beginning in late 2019, CREW repeatedly sought to obtain Generation Now’s 2018 tax return directly from the organization’s treasurer, a lawyer named Eric Lycan. On multiple occasions, Lycan informed CREW that the tax return, known as a Form 990, would soon be made available. But, more than nine months after it was due, CREW has still not received a copy.
Such reporting delays are unfortunately common with groups affiliated with Lycan. In fact, he has worked for several nonprofit groups that appear to work from the same playbook: contributing anonymously-sourced money to super PACs that he also works for, which then spend those contributions on political ads, while playing fast and loose with IRS rules.
This arrangement has been used to inject millions of dollars in anonymous funds into elections. Another dark money nonprofit group he serves as treasurer for, which is also seemingly referred to in this week’s complaint as another pass-through vehicle for FirstEnergy’s spending, has already pumped more than a million dollars into the 2020 elections.
According to the criminal complaint against Householder and his associates, an unnamed company, identified by reporters to be FirstEnergy, contributed $60 million to Generation Now over a roughly three-year period. Among other things, Generation Now used the money to support the election of candidates who would assist Householder in his efforts to reclaim the speakership of the Ohio House and who would subsequently support the nuclear bailout bill. The complaint alleges that $500,000 was also converted for Householder’s personal use through Generation Now and other entities.
In 2018, Generation Now pursued its political spending mission through a linked super PAC. That year, the nonprofit contributed $1.05 million to a federal super PAC, Growth and Opportunity PAC. Generation Now’s contributions accounted for 99% of the super PAC’s total fundraising during the election cycle. Lycan also served as the super PAC’s treasurer. Growth and Opportunity PAC spent more than $900,000 on political ads supporting Householder and others who would support his selection as Speaker.
When it came time for Generation Now to disclose its political spending, along with other information about its 2018 activity to the IRS, the group did no such thing. Nearly six months after the group’s Form 990 was ultimately due, Generation Now had still not reported its finances, according to a letter Lycan sent to CREW.
As a group whose tax year ends on December 31, Generation Now was required to file its 2018 tax return by May 15, 2019 and no later than November 15, 2019 if it sought an extension. CREW requested the form from Lycan in November 2019, shortly after the extended due date. Lycan responded that the form had not been filed but it would be made available to CREW “in the next couples weeks.” The next month, CREW was told it would be filed “shortly,” but again it wasn’t.
In March 2020, CREW sent a formal request for the form through the mail to four different addresses associated with Generation Now. Lycan responded in April to say the form still had not been filed, almost six months after the latest day it could have been due.
A familiar playbook in 2020
Though Generation Now hasn’t spent on super PAC contributions since 2018, another dark money group that Lycan works for, which is connected to the bribery scheme, has pumped funding into a super PAC spending on 2020 state races.
A group referred to in the complaint as “The Coalition,” which is identified as another recipient of funding from the company revealed to be FirstEnergy, appears to be the Coalition for Growth and Opportunity. The complaint says the unidentified group wired $54,000 to Generation Now. Coalition for Growth and Opportunity’s 2018 tax return shows they gave that amount. The complaint also says the unidentified group paid a $191,000 expense to a media company, which Coalition for Growth and Opportunity did in 2017. Lycan serves as Coalition for Growth and Opportunity’s treasurer.
The complaint also says “The Coalition” was used as a pass-through for more than a million dollars in super PAC contributions in 2020. A disclosure report filed with the Federal Election Commission covering the first few months of this year shows that the Coalition for Growth and Opportunity gave a similarly-named super PAC, Growth and Opportunity PAC, $1.05 million dollars. The super PAC spent hundreds of thousands of dollars to support candidates backed by Householder in Ohio House primaries during this same period.
In response to questions about the super PAC’s spending in those races, Householder admitted that he knew details of its fundraising. “I raise money to it, but I don’t control it,” Householder told the Brown County Press in March. Since nearly all of the super PAC’s funding from around the time of that interview came from Coalition for Growth and Opportunity, Householder’s statement seems to mean that he knew who was funding the nonprofit, even though the public didn’t.
A pattern of evasion
This also isn’t the first time a group linked by Lycan has failed to file its taxes on time. Indeed, Generation Now’s previous tax form, covering 2017, was filed almost a year after the latest possible due date. In addition, after spending around a hundred thousand dollars on political ads during 2017, Coalition for Growth and Opportunity also failed to file its taxes covering that year when they were due.
Last year, CREW requested a tax return covering 2017 for Coalition for Growth and Opportunity from Lycan. CREW’s request was sent almost seven months after the group would have had to report its 2017 spending to the IRS. When the form was provided to CREW a few weeks later, the signature line showed it was signed–and potentially entirely filled out–after the date of CREW’s request. The filing raised the question whether the group would have ever filed the tax return as required if CREW hadn’t asked about it.
The facts, as laid out in the complaint filed against Householder and his associates, provide a stark example of the potential for corruption inherent to anonymous political contributions taken to the extreme. One thing that may have helped them get away with it, at least for the period during which they did, was keeping their finances from public scrutiny by failing to file their tax returns with the IRS. Refusing to follow the limited disclosure rules that apply to dark money nonprofits may allow a group to avoid having the documents scrutinized for red flags, but it also raises the question of what a group has to hide. In this case, where there was smoke, there was an inferno.