PAC donors, ‘money laundering’ charge rock Democratic gubernatorial primary

Lansing — Campaign finance anomalies, accusations and oversights are rocking Michigan's Democratic gubernatorial primary in the run-up to Tuesday's primary.

Ann Arbor businessman Shri Thanedar has delayed disclosing $6 million in spending, former Senate minority leader Gretchen Whitmer is benefiting from $550,000 in untraceable advertising money and former Detroit health director Abdul El-Sayed this week received a questionable $61,200 contribution from a political action committee.

The campaign finance developments arose as the three candidate compete to see who will face off in November against the winner of the Republican primary, where four hopefuls, including Attorney General Bill Schuette and Lt. Gov. Brian Calley, are battling.  

Candidate fundraising and outside group spending through July 22 had already put the gubernatorial race on pace to possibly be the most expensive in Michigan's history.

Craig Mauger, a watchdog with the Michigan Campaign Finance Network, has noted that spending could  break the record $79 million in 2006's campaign.

The increasingly combative Democratic primary was punctuated Thursday by El-Sayed’s explosive tweet alleging “money laundering” by Whitmer, which he quickly back tracked by noting she’d done nothing illegal.

El-Sayed battled accusations of hypocrisy Friday morning when The Detroit News first highlighted new state reports showing he appeared to benefit from a contribution shift the Whitmer campaign alleged could be illegal instead.

Four separate donors who had already given El-Sayed’s campaign $6,800 contributions, the maximum allowed by law, this week gave a combined $80,000 to a PAC run by state Rep. Abdullah Hammoud, D-Dearborn.

The next day Hammoud for Michigan gave a large contribution to El-Sayed’s campaign, which reported receiving a cumulative total of $61,200 from the PAC. The PAC had $34,476 in cash reserves prior to the recent contributions.

Mauger said donors routinely bypass the state’s individual contribution limits by giving to outside groups that continue to support their chosen candidate.

PACs can give up to $68,000 to campaigns, 10 times the legal amount of an individual.

“It’s not exactly rare, but it shows the many ways you could get around contribution limits if you wanted to continue supporting a candidate after you’ve already given them the max,” Mauger said.

Proving a campaign finance violation in such cases is difficult, he added, because state law requires a complainant to show the contributor and PAC had an agreement or arrangement the money would be transferred to a campaign. 

PAC donations stir fury

A late contribution report filed by Hammoud’s PAC on Tuesday showed donations of $50,000 from Ashwin Vasan of New York and $10,000 each from Aisha Jukaku of New York, Hasan Rizvi of California and Western Michigan University physician Wael Hakmeh. All had previously given maximum contributions to El-Sayed, and Jukaku appears to be his sister-in-law.

“One day after falsely accusing Gretchen Whitmer of money laundering, it now appears that Abdul El-Sayed is running a potentially illegal donor funneling scheme,” Whitmer Press Secretary Nicole Simmons said in a statement.  “While Gretchen has kept her campaign positive, Abdul has stooped to the level of Donald Trump by peddling conspiracy theories and making defamatory attacks on Twitter.”

Democratic strategist Joe Disano filed a campaign finance complaint against El-Sayed on Friday afternoon asking Secretary of State Ruth Johnson to “investigate this apparent scheme to circumvent Michigan’s campaign contribution limits.”

El-Sayed’s campaign fired back, calling the criticism a "last-ditch effort to draw attention from the $550,000 in untraceable funds that Sen. Whitmer benefited" from through a political organization called Build a Better Michigan, which shares staff with the Whitmer campaign and is running ads that support her.

"Dark money isn’t made light by making unsubstantiated accusations about a mundane, non-corporate, fully transparent and entirely legal political donation," said El-Sayed spokesman Adam Joseph, who urged Whitmer and Build a Better Michigan to "do what’s right by Michigan voters and disclose where the $550,000 have come from."

Build a Better Michigan disclosed its donors last month but reported large contributions from two groups that do not disclose their own donors, Progressive Advocacy Trust of Lansing and the Phil Hart Democratic Club of Macomb County. 

El-Sayed on Thursday accused Whitmer of "money laundering" because of those donations. The former Detroit health director later clarified that he doesn't believe  Whitmer or Build a Better Michigan did anything illegal but "used a legal loophole to subvert transparency."

El-Sayed’s accusation caused a firestorm online. The Michigan Nurses Association, one of the only union groups that endorsed El-Sayed over Whitmer, called it “an unfortunate distraction from the larger issues facing Michigan families in the final days before the primary.”

“The ideals that led us to support El-Sayed still hold true,” MNA President Jamie Brown said in a statement. “We still share a vision for single payer health care.”

'Gray area of the law'

Progressive Advocacy Trust, set up as an “administrative account” through the Ingham County Democratic Party, and the Phil Hart Democratic Club “work in a gray area of the law” that allows them to avoid state or federal campaign finance rules, Mauger said. A similar group named Michigan Advocacy Trust contributed untraceable money to Attorney General Bill Schuette in 2014, he noted.

El-Sayed, who has sworn off corporate PAC contributions, this week suggested the groups could be funded by corporate donors such as Blue Cross Blue Shield of Michigan, whose executives hosted a fundraiser for Whitmer where she reported raising $144,710 in campaign cash.

FEC records show the Michigan Pipe Trades Association gave Progressive Advocacy Trust $250,000 in February, a figure the union disclosed in its own campaign finance report. Other donors to the groups are not known. Spokesman Mark Fisk said Progressive Advocacy Trust donated to Build a Better Michigan because they “share similar core values.”

Build a Better Michigan was founded by Mark Burton, Whitmer’s former chief of staff in the state Senate, and has paid salaries to at least six Whitmer campaign staff. The  group is organized under Section 527 of the Internal Revenue Code, which does not prohibit it from coordinating with the Whitmer campaign as long as it does not make independent expenditures on her behalf.

"Unlike Abdul El-Sayed, I can say with 100 percent confidence that all contributions to Build a Better Michigan are legal,” Burton said.

Hammoud released a statement Friday afternoon saying donors gave to his PAC because "they believe in its mission."

"The account in turn supports candidates whose records and platforms align with its goals," Hammoud said. “Every dollar was disclosed and accounted for, in compliance with campaign finance laws. Every dollar is traceable and every transaction transparent.”

Several donors who maxed out their individual contributions to Whitmer have also given to Build a Better Michigan, providing them with another avenue to support her similar to a PAC.

Ann Arbor attorney Mark Bernstein gave $32,000, Bell’s Brewery owner Larry Bell gave $10,000 and Whitmer’s father, Richard Whitmer, gave $10,000 to the group after also giving $6,800 to Whitmer’s campaign. The Bernstein Family PAC also cut Whitmer a maximum $68,000 check.

Thanedar's undisclosed spending

Thanedar, meanwhile, has not yet disclosed more than $6 million in spending that he erroneously left off his pre-primary finance report filed last week. He told The Detroit News his campaign intends to file an amended report by Sunday, meaning it could be made public less than two days before the primary.

The Ann Arbor entrepreneur, who has put more than $10 million of his own money into the race and is the stop spender, has faced questions over his campaign staff and when he began paying two Detroit radio hosts who had promoted him on air without disclosing their ties. One of those hosts, David Alexander Bullock, is now his campaign manager.

Thanedar last week promised to file an amended report detailing his spending through July 22 but said Friday the process was slowed by “technical issues with data transfer” that have now been resolved. The bulk of the money was spent on television ads, digital promotions and direct mail, he said.

Michigan relies on candidates to self-report their spending, and the ability to vet that spending can help the public “vet what’s going on with these races for very important public office,” Mauger said.

Secretary of State spokesman Fred Woodhams said Thursday that no one had filed a campaign finance complaint against Thanedar for the disclosure error. The campaign had not contacted the Bureau of Elections to discuss the need for a new report.

“If the committee files an amended report that is substantially different than what was originally filed, it may be assessed a late-filing fee,” Woodhams said. “There is nothing that the bureau can do to compel an amended report to be filed.”

The Republican gubernatorial primary has also been marked by significant spending from “dark money” groups that do not disclose donors but have run ads to benefit Attorney General Bill Schuette and Lt. Gov. Brian Calley.

“The state of Michigan is getting to see many of the flaws and loopholes of our campaign finance system on full display this summer,” Mauger said.

joosting@detroitnews.com

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