Millions of dollars, thousands of robocalls and 1 breach (2023)

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A New York Times investigation found that a group of Republican politicians used automated robocalls to raise $89 million for police officers, veterans and firefighters. Today, investigative reporter David Fahrenthold discusses how they actually spend their money and the loopholes that allow them to do so.

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Today is Thursday May 25th.

So, David, you're an investigative reporter covering nonprofit organizations and financial abuse in that world. You just released a major survey of this group of nonprofits. Tell me what you found. What happened?

This story actually started over a year ago and I got a message from a source saying, look, there are a lot of these non-profits, not traditional charities, but political non-profits. On the paperwork, these groups don't even appear to be connected, but they are. All of them are connected to each other. What they do together is they get big money from donations from common people, small donations from many common people, and when they get that money, they just don't spend it like they say they will. Now this piqued my interest for several reasons. First of all, according to the suggestion, the amount of money that may be involved is quite large: tens of millions of dollars is what we were originally told. The second is the type of nonprofit involved, a political nonprofit called a 527.

527 will it be?

Therefore, we must understand tax law. I promise you this is probably the only time we have to do it.

Alright.

527 is an area of ​​tax law that creates a type of nonprofit organization for political purposes. You can give them money. You do not receive a tax deduction for charitable donations. This is not a charity. But its purpose is to raise money for politics, which is then used to help get politicians elected.

I see

So I'm very interested in these groups. Another reason all of this piqued my interest was the way they were raising money, through robocalls, discreet robocalls. How many times have you and I picked up the phone, realized it was a robocall, and hung up in a split second?

Very.

In this case, these people used robocalls to collect tens of millions of thousands of donations. How does it work? So the first thing I have to do in this story is to find the robocalls. What do these robocalls sound like? What makes them so effective? The answer is very interesting. [play music]

For example?

Think about robocalls, what tells you what a robocall is? You will hear a real robotic voice or one with a foreign accent. These are not present on these phones.

When you answer the phone, it sounds like you're talking to a jaded cop from the Midwest who just had a bad experience with the last caller.

They are as realistic as the recordings are.

It usually starts with your name.

If you have a common name, like me, they already have your name registered.

Usually the joke is at the beginning.

Or one of them like you're harder to catch than a bunny on skates.

God.

Among other things, it is not really difficult to catch rabbits on skates. But the idea is that I called you and you didn't answer.

So it really sounds like a person, but it's really just a computer.

It's a guy in front of a computer who pushes a button to play a cue and then there's enough preloaded responses to get those responses, plus things like umm and giggles and everything about the conversation, but it's just a guy who pushes the button on the computer.

Well, after that sweet dad joke, what then?

Well, then you get to the heart of the call.

They represent why they are calling.

These groups always speak for one of three reasons.

Help police officers, firefighters or veterans.

So they asked you a question.

They said the donations would be used to help elect representatives sympathetic to those groups: police officers, firefighters, veterans.

In some cases, they say that giving them actually means supporting the families of officers who have died.

Well, what if you are still on the line to the end of the field?

They start talking about numbers and usually suggest some very small amounts.

They will say that the maximum bet is $50. Small ones are $30. They want you to commit to a certain number instead of working hard to get a really high number. They will gladly donate $35 or $50.

Okay, $35, $50, very small donations.

Yes, very small. But when we look at the finances of these groups and add up all the money they've raised during their nine years in business, they've raised $89 million.

From a robocall?

that's how it is. More than 18,000 donations went to these groups, the majority of which were under $200. Many of the donors you see on the form are people in their 70s, 80s, and 90s. They are retired. This is how it has affected many people across the country time and time again. We speak with a woman named Louise McConchie who lives in Puyallup, Washington, just outside of Seattle. She offered 35 different times for the five groups we looked at, for a total of $3,650. And what she didn't know was that of all the money she and many others donated, barely a penny went where she promised. The person she calls is absolutely right on this point.

After my conversation with Ms. McConkie, we did a lot of reporting. We review 15,000 pages of transaction records. We did all this research trying to figure out where the money that Louise McConkey and thousands of people like her donated was going, and it turned out that only about 1% of donations went to whatever they thought they were supporting. 1% is used to help politicians win elections.

So what happened to the rest of the money?

This is not easy to understand. What we have to do is find public documents from these non-profit organizations that explain what they do with the money. When we found them, we found out that they had submitted 15,000 pages of documents. In some cases, they seem to go out of their way to make their findings as incomprehensible as possible. For example, they sometimes spend $6 million in a year or six months, reporting $1 at a time.

God.

We pay this company $1 today and another $1 the next day.

Why are you committing in these small increments?

Well, one possible reason is that it makes my job more difficult. It's really hard for someone like me to try to add up all these little expenses and really understand what these groups are doing.

interesting. Alright.

And we count a lot to find out that many of their sellers are these fake companies. It's really hard to find out who the real people behind these companies are. After that, we went through company records to find out who was behind these payment companies. It took some time, but it turns out that about 90% of the spending of these groups is just to pay for additional fundraising expenses. They just waste it on more robocalls.

Wait, so they use the money collected from robocalls to make more robocalls?

That. One analyst we spoke to described it as an elaborate ice cream cone that licks itself. Fundraising alone can pay for more fundraising.

These are some intensive costs. If we're supposed to take them for granted, it's like, wow.

Yes, this is not normal. Most nonprofit charities, most political campaigns, and anyone you might think might be associated with these groups is inversely related to their fundraising efforts. They pay to go to fundraising events to raise money so they can use it to do something in the world. Or if you're a charity, go help the world. If you are a political activist, support the candidates.

It's like a fundraiser for a non-profit organization. They spent so much of the money they raised through fundraising that they barely had any to use for their theoretical purposes.

Yes, like a huge red flag.

Yeah, when we look at other groups like this, other political nonprofits, most of them don't get more than a third of their fundraising expenses.

Oh, wow.

At that point, your question is who runs these things. Who would organize such an operation? And the answer to this question is also in the consumption record. As it turns out, it all goes back to three men who started Republican college politics in Wisconsin around 2008. And the ringleader appears to be a man named John Connors. He was an aide to former Wisconsin Governor Scott Walker's political empire. He graduated from Wisconsin in 2008, found a few jobs for Walker, and then left to start his own consulting firm. He is a major player in Wisconsin politics, but not on the national level.

The other two, Kyle Maichle and Simon Lewis, were his employees. So Conners hired Lewis as COO and Mechler as a researcher. So those three have this connection. Somehow they came together in Republican college politics in Wisconsin, before they were minor players in Wisconsin politics.

How did these three people carry out the operation you describe? Was it black from the start?

Well, it started with a group called the Veterans Action Network. This is a 527 group that showed up in Wisconsin in 2014 and became a customer. He began paying the firm of John Connors for political consulting. Now, that doesn't make a lot of sense when you look at the Veterans Action Network, when you look at his profile. He claimed it was a group designed to help veterans make a difference politically. When you look at what he actually does with his money, he doesn't. He spent almost all of his money on fundraising. He spent hundreds of thousands of dollars on the Connors company. It does help candidates anywhere, anytime. As a political operation, it failed from start to finish. So you ask yourself, what's the point of that? Why does it exist? You got a clue from an email Conners sent to someone in 2016 when he said his company created the Veterans Action Network; they actually created a company and then became his client. They created their own client and started charging. For them, the Veterans Action Network was a success. He had no political influence, but he paid Connors' company hundreds of thousands of dollars.

And then you see the movement being emulated on a larger scale by four new groups formed in 2017, all of them people close to Connors. These are 527 nonprofit organizations that, like the Veterans Action Network, work on these conservative causes: Police, Fire, Veterans. They raised huge sums of money, had almost no political influence, and paid a lot of money to Conners and his colleagues, Lewis and Mychler, two others. In the end, we realized that these groups had no influence on anyone in politics, but they had great influence on the three of them. His company has received more than $2.8 million in funding from the five groups.

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So what he found here: These 527 groups raised money from ordinary citizens, committed to using the donations for things that mattered to them, like the police or veterans, but didn't spend the money on things that mattered to them: This was a little of a betrayal of citizens - not doing what they were told. Of course, it's illegal, right?

I feel like I've asked a lot of people that question in covering this story. The answer is that it probably isn't illegal.

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We'll be right back.

So David, this sounds like a pretty obvious scam. How is this not illegal?

Well, listen, if it's a 501(c)(3) charity, a traditional charity, it probably is. There are many state prosecutors and others who think it is their job to defend donors in this situation. If the donor is being scammed, you can step in, sue them, take some kind of legal action. But in the political context of nonprofit political organizations, there is no real regulator to play that role. These groups exist in some kind of blind spot in the campaign finance system, apparently on purpose.

They found a way to be regulated by the IRS, the regulator with less money, less interest, and more distraction in the game. The only thing that can come down to their enforcement mechanism is if the IRS tells them, hey, listen, you should act primarily to help the applicant. you are not. In fact, these groups say they just got audited by the IRS, who told them they were doing a good job.

We cannot confirm this. The IRS does not tell us what they do with individual taxpayers. But these groups said, look, we talked to the regulators. We just finished our exams with the strongest watchdog in our little world and we did very well.

Well, the IRS says they're doing fine. But why does this blind spot exist?

Basically, the idea behind campaign finance regulation is that if you're going to raise money for politics, you're supposed to want to use it to influence policy. So all the regulation, all the restrictions, and all the transparency is focused on giving money to politicians, who uses their money to help which politician protects himself from the quid pro quo. The idea that you're going to raise money and then not spend it on politics—give it to yourself or your fundraising organization, take it out of politics—you don't really have a system to control it. When this system was built, no one thought there would be a problem. So now it's very easy to do because no one is really trying to protect against it.

So basically, when you envisioned these types of nonprofits, didn't you envision the possibility of using that money for something completely different?

that's how it is. These groups are very interested in this. So there is an alternative in the law that if you spend more than $1,000 helping any federal candidate, you have to report it to the Federal Election Commission, which has its own problems, but is a much more active and transparent institution. If you spend more than a certain amount in different states, you should start reporting to campaign treasurers in those states. These groups are very careful not to do anything, just keep their money or spend it on things that have nothing to do with politics. For this reason, the only real rule they have to follow is this in the tax code that they have to be governed primarily - those are two big words - primarily to influence the election of candidates or the election of unelected people, like Supreme . Court judges.

But do these groups pass that test?

Well, we talked to a lot of campaign finance experts and they said no: any reasonable expectation is that if you raise $89 million and only spend 1% on actual politics, you won't primarily influence the election. But what these groups are saying is, look, your thinking is not creative enough. You're just not drawing a wide enough circle of behavior. They say, look, everything we do, even when we ask you for money, when we call you and say, hey, the police are under attack, give us money, it's political activism in our own way. Yes, we are not going to name the candidates. We're not telling you who to vote for, we're asking you a question that you might consider later that changes your vote. So all they're saying is that when you define policy broadly and indirectly enough, everything they do actually fits that definition.

So they're basically saying that the application itself is political, even though the application clearly promises to spend money on real candidates, which it doesn't.

It is a strange circular logic, if you pay for a service, you have already received it. A phone call is both financing and a thing in itself.

Self-licking ice cream cone.

That's right, a self-licking ice cream cone.

So it's a pretty big hole that doesn't seem to protect us at all.

No, there is nothing in this system that protects donors.

So what do you three tell us about all of this? I mean once you find the connection between your company and these 527 groups.

Basically, they are providing a service. These non-profit organizations trying to change the world are paid well deservedly for their service. I want to read you a quote from John Connors where he wrote, "Yes, I get paid for what I do. Everybody does it," he said. "But my real conclusion is that Americans are happy with the system."

How much did he get back?

The groups he owns have earned over a million dollars.

So American satisfaction plus a million dollars.

law. You know, I've been surprised by this coverage. I keep thinking we're going to find something more concrete, some real leverage that these groups use with all their money, and I'm surprised I'm wrong.

ley.

In theory, the person defending the donor is the donor himself. In theory, this system is transparent. These groups must report their spending to the IRS, so donors don't need someone to advocate for them. They can look at their files and say, well, I want to support this group. But our findings show how foolish that expectation is. If you're a donor and you decide, hey, I want to know if the American Police Association is making good use of my money. First, you need to go to the Byzantine IRS website, which doesn't really tell you anything about what you're looking for.

Then if you manage to find one of their expense reports, you have to read 900 pages at a time for $1. We spend a lot of time with powerful computers trying to get a true picture of how these groups spend their money. It is absurd to think that individual donors have a reasonable idea of ​​how their money will be spent in a day, a week, or even a month. So if transparency is supposed to be a panacea in this system, that part doesn't work either.

There are no transparent elements in the rules at all.

Yes, you can see all the trees, but you can't see the forest.

Back here, our country really allows almost unlimited money in politics through these 527s and super PACs and everything. Critics worry that there is too much money in politics, that unlimited money will corrupt our democracy and disenfranchise voters. Of course, this is still a problem. But what you find in our situation is that the system completely abandons politics in a very direct way, like selling voters, taking their money, putting it in their pockets. Politics is just a facade.

law. Yes, the whole system is based on the idea of ​​stopping the quid pro quo, or at least clarifying whether there is an opportunity for the quid pro quo. He's not ready for what's going on here and there's zero payoff. You give money to a guy who takes it completely out of the system and doesn't do what you're told. There's really no rigging here.

Ironically, there are two groups of victims here. There are donors and their money is taken out of the system. But another victim he can claim is Republican politicians, some of whom have lobbied heavily for deregulation. Many of the causes for which these groups raise money are traditionally conservative. Many of the people they raised money from are traditionally conservative voters. Therefore, these individuals may have donated to Republican candidates and may believe that they are donating to Republican candidates. But instead, his money was siphoned out of the system somehow. So the somewhat ironic result of this deregulation of politics is that they also allow people to use politics as a shield, use it as bait, and then take all the money out of the system and not give it to politicians.

One case really caught my attention. In 2020, a year in which policing and supporting the police in America is clearly a great cause and a great politically controversial issue, these groups raised $20 million, apparently thanks to outrage from Black Lives and emotional protests from George Floyd. where people feel the police are being criticized too much, are also important. They spend almost nothing. Both groups spent almost nothing on politics that year. So if you donate to these groups and you think, well, I've done my part to support the police in America, but you haven't.

latitude. I mean, he's very cynical, isn't he? Smart, but also a coward?

Absolutely.

Do you think this vulnerability, now that you've exposed it to a large extent, will be closed? Or do you think it's a bit against the spirit of the law to close the loophole that, as you point out, is supposed to allow all kinds of money to be spent in a rather unregulated way? Does anyone really want to plug this loophole?

I hate to be cynical, but I don't think it goes off. To me, it shows how little interest or opportunity there is for any meaningful campaign finance reform in this country. Because if there's any low hanging fruit here, this is it. It is about people using money contrary to what they think, and the same politicians, those who want to change the laws, are directly harmed.

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And are there no signs of that changing anytime soon?

No, not that I know of.

Thanks, David.

Thanks for including me. [play music]

We'll be right back.

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This is what you should know today. On Wednesday, The Times reported that a drone attack on the Kremlin this month was likely orchestrated by a Ukrainian special forces unit. US intelligence agencies came to that conclusion in part by intercepting communications between Ukrainian and Russian officials. The May 3 attack alarmed the Biden administration, which fears an attack inside Russia could prompt Moscow to retaliate outside Ukraine.

US intelligence agencies and Microsoft said they had uncovered mysterious computer code that they said was installed on Guam's telecommunications systems by a Chinese government hacking group. The discovery caused panic because Guam, with its designated port and sprawling US airbase, would be at the center of any US military response to a Chinese invasion of Taiwan.

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I'm Sabrina Tavernise. See you tomorrow.