Newly disclosed records of the Federal Election Commission’s (FEC) investigation of a notorious dark money group called the Commission on Hope, Growth & Opportunity (CHGO) reveal that the attempts by the organization’s leaders to minimize their involvement are directly contradicted by the recollections of their associates. The documents also shed more light on the concerning decision by CHGO’s key players to distribute to themselves $1.1 million in leftover funds.
In November 2015, Citizens for Responsibility and Ethics in Washington (CREW) sued the FEC over its failure to act against CHGO, which spent millions to influence the 2010 election but did not disclose that spending or its donors. At the same time, CREW filed a criminal complaint with the United States Attorney’s Office alleging key associates of the group may have violated the law by making false statements to the government, obstructing the FEC’s investigation, and pocketing $1.1 million originally meant for broadcasting television ads.
Through a Freedom of Information Act request, CREW obtained more than 1,600 pages of internal FEC documents from the investigation for public release. These documents, which include the investigators’ interview notes, shed significant light on CHGO’s true activities. They also make clear how the efforts of some of CHGO’s key players to downplay their involvement are at odds with the recollections of their associates.
Take Scott Reed, for instance. In 2010, the current senior strategist for the U.S. Chamber of Commerce was identified in press reports as the founder of CHGO. But CHGO’s general counsel William Canfield, a prominent Republican lawyer who recently served as counsel for the boundary-pushing pro-Carly Fiorina super PAC “CARLY for America,” denied to the FEC’s investigators that Reed played such a role. Reed himself claimed that he could not recall whether he founded the group.
In a July 2015 interview with the FEC, according to post-interview notes (at 653-654 of the documents released by the FEC), Reed claimed he could not recall “having anything to do with its formation in 2010” because “he had been involved with too many political committees since 2010 to have a clear recollection” in 2015. He also claimed he merely gave advice to the group:
Reed said that he could not recall having any contact with anyone involved with CHGO after its formation. Reed commented that he gave his advice and moved on.
When asked what advice he gave or other role he played relating to CHGO, Reed said that he believes that he was involved in some discussions on the strategic placements of TV ads.
Reed’s memory, however, does not match what the people who worked on CHGO’s political ad campaigns told the FEC.
Kira Swencki, for example, who worked in 2010 at Meridian Strategies, the firm that CHGO paid to produce and place ads, told investigators that “she communicated frequently with Scott Reed” while developing PowerPoint presentations for CHGO, adding that Reed “would provide her with edits and instructions” (at 1305). She also said that “Reed was included in any e-mail communications that she had with Canfield” on CHGO-related projects, which included work on the CHGO website. Steve Powell, who was nominally CHGO’s president but actually just produced ads for the group, told FEC investigators in a written statement that “Scott Reed would sometimes participate in phone conversations relevant to CHGO,” though he was “uncertain as to what role Mr. Reed may have had with respect to CHGO” (at 365).
The most damning description of Reed’s role in CHGO comes from Michael Mihalke, who ran Meridian Strategies. He told the FEC in a written statement that he got involved in CHGO after Reed approached him about working for a group he was considering forming, which ultimately became CHGO (at 327). Mihalke identified Reed, along with Wayne Berman, another longtime political operative who recently served as the national finance chair of Sen. Marco Rubio’s (R-FL) presidential campaign, as “consultant[s]” for CHGO and said that in order for his firm to bill CHGO for work, he would “propose aggregate media costs to CHGO’s board and consultant” (at 328). In an interview with the FEC, Mihalke also said that Reed and Canfield “provided final approval for the ads for CHGO” (at 1309). Later in his interview, Mihalke said that “Reed led CHGO” (at 1312):
Mihalke stated that Reed’s primary involvement with CHGO was fundraising and consulting on the content of ads and location for placement, and that Reed led CHGO. Mihalke said that he was not aware of any work that Berman performed for CHGO on its ads, adding, “He had no role in placement.” At one point, Mihalke stated that Berman may have helped with fundraising.
Most incredibly, Mihalke also told the FEC’s investigators, who had confronted him with a discrepancy between CHGO statements about media expenses on its tax forms and his company’s bank records, that Reed directed him to split $1.1 million in unused advertising money among himself, Reed, and Berman (at 1311-1312):
He stated that when ad placements ended, approximately $1,100,000 of CHGO funds remained. Mihalke said that these unused funds were to be given back to CHGO. Mihalke went on to state that, at this time, he told Scott Reed of the unused CHGO funds. He said that Reed told him that the remaining $1,100,000 would be evenly divided among Reed, Mihalke, and Wayne Berman. Mihalke said that Reed had said that this would cover costs of “fundraising” and would be a “fundraising commission.” Mihalke said that the conversation between Reed and Mihalke regarding the division of these funds occurred after the 2010 election and that the actual distribution occurred “sometime in the following year.”
When asked, Mihalke stated that he could not recall whether this conversation that he had with Reed occurred in person, over the phone, or by some other means. Mihalke said that he has no records relating to this communication. Mihalke said that no one else was involved in this conversation that he had with Reed.
Mihalke cited his additional efforts and exclusive advertising role he performed for CHGO. Mihalke said that these efforts forced him to forgo other clients during this period and that his allocation covered his “opportunity cost” for being CHGO’s exclusive vendor. Mihalke stated that other than himself, Reed and Berman, he did not know if anyone else knew of this division of funds.
If Mihalke’s story is true, the distribution of the leftover $1.1 million raises significant legal questions, particularly since there is no indication on the public record that anyone with legal authority to distribute the excess money approved the split. According to Mihalke, Reed made the decision, but Reed was not a named officer on CHGO’s tax returns or its application for tax-exempt status. Furthermore, Reed told the FEC that his role with CHGO was limited to providing advice. In addition, CHGO told the IRS that it did not spend any money on fundraising services. Though it’s conceivable that Reed was given the authority to divide the money, if he wasn’t, as CREW noted in its criminal complaint, “Reed may have committed theft by distributing CHGO’s excess $1.1 million to Berman, Mihalke, and himself, and by appropriating his portion of the funds.”
The case of Scott Reed is just one example of the how the evidence collected in the FEC’s investigation of CHGO contradicts the stories told by key players in the shady organization. The documents also make clear how the FEC’s failure to hold the group, and the people who ran it, accountable is inexcusable. This is why CREW has sued the agency in order to force them to reopen and reexamine the case. Read CREW’s latest motion for summary judgment, which relies on the investigative documents, here.