Who Is Watching The Money?

When Brody Mullins published "The Long History of People Stealing Money from Political Action Committees," we didn't just read it — we put it to the test. In this episode, Micaela Isler, David Schild, and Adam Belmar dig into the actual case data, separate employee-funded and business trade association PACs from those driving the headlines, and argue that a scary headline is best answered not with defensiveness but with discipline. Plus: the FEC's enforcement gap, why "the courts are closed" is never a defense, and what stewardship of other people's money really demands. 

Transcript

Micaela Isler (00:00):
I say this all day every day that trust has to be earned and maintained actively. Welcome back to the Fact About PACS podcast. I'm Mikayla Isler, NAPAC's president and CEO, and I'm joined today by my co-host Adam Belmar and David Shield. Today we're reacting to a piece of journalism, a newsletter from Brody Mullins, our friend over at Influence, who's been a great guest of this show and really asking what it actually means for the Employee Funded and Business Trade Association PAC community. The headline is striking. The analysis when you dig in is a bit more nuanced.
Adam Belmar (00:43):
Let's get into it.
Micaela Isler (00:44):
So guys, Brody's newsletter dropped on a Sunday morning and like a lot of you, I read it and felt that sort of familiar tension and the headline is "The long history of people stealing money from political action committees." And he references a companion piece from notice, sex, drugs, and debt. Treasurers keep fleecing their political committes. We're talking a million dollar embezzlement from a Silicon Valley Trade Association PAC, nearly $840,000 taken from committees tied to two sitting US senators. And so yes, real money, certainly real harm.
Adam Belmar (01:23):
And Brody's underlying argument is that PAC oversight is weak, that rules governing how PAC funds can be spent are loose, that a lot of organizations don't do enough to police their own PACs and that the FEC, which is supposed to be the backstop, is currently operating without a quorum and can't bring enforcement cases. He quotes a longtime election lawyer, Brett Kapel, who puts it plainly. "These thefts could have been avoided with minimal internal financial controls.
David Schild (01:55):
"First, this was sort of an incredible read. It felt very familiar. I saw that title, Sex, Drugs, and Debt. If I had known there were sex and drugs in the pack business, I might've stayed a little bit longer. I'm very familiar with the debt part of the equation, but this is a familiar story and I say this in jest, which is we have seen time and time again, this issue of a lot of money concentrated in a small place and there's a lack of internal controls and there's a lack of oversight. But yeah, I think the issue of our political action committees themselves simply ripe for theft and abuse and compliance issues by their very nature, by their very design. I think that requires a deeper dive, a little bit more explanation.
Micaela Isler (02:37):
Yeah. And I'll be honest, I didn't just take the framing at face value. We've got a great summer intern here and I was like, " I'm not so sure this is an everyday occurrence, but let's look into this a little bit. "And so Brandon knew our summer intern, University of Florida finance student here through TFAS. He dug into the cases over the weekend and earlier this week to sort of challenge Brody's premise. And what Brandon came back with was pretty sharp and it's essentially what shapes the conversation that I think we're going to have today, guys.
Adam Belmar (03:09):
So here's where the analysis gets important. When you look at the specific cases cited in the piece, the vast majority involve campaign committees, leadership PACs, political consultants, not employee funded or business trade association PACS. Those are very different governance structures, different staffing models, different oversight mechanisms. Grouping them all under the same PAC headline creates an impression that doesn't match reality for most of the practitioners listening to our show.
David Schild (03:43):
And isn't this the story of our industry for so long where people conflate an independent only expenditure committee, a super PAC, with an employee separate segregated fund, an employee funded political action committee, with a national party committee, with a campaign committee. I think the people listening to the show understand those distinctions. Hopefully your boss, the VP of government relations, your general counsel, hopefully they understand those distinctions. Do your contributors understand those distinctions? I would bet not. And how many journalists really do? That's a fair question to ask.
Adam Belmar (04:13):
Well, David, I think you're spot on and I get really frustrated sometimes like yesterday and I'll call them out. I saw an open secrets email that I get every day. It had a list of things going on that they were pointing out and I felt like almost the language was intentionally misleading. They are looking at PACS and they are conflating money that a corporation spends with money that the employee funded PAC is donating to candidates for their use by law and elections. These are different things in the same sentence.
David Schild (04:48):
Well, I think if you look at the history of corporate political action committees, there's really only two examples where the business pack world has been touched by just obvious fraud. And one is obviously the National Venture Capital Association. That's an insider embezzlement case, right? Very serious. The other is Arnold and Porter, and that's a story about the system working because someone from outside the organization tried to redirect $40,000 through fraudulent transaction. The PAC caught it, reported it, and recovered the funds. And I don't think that's a story of systemic corruption. That's a good story of detection and response. And I'm reminded that when it comes to campaign committees, unfortunately for decades there has been so much temptation in the form of one or two individuals controlling such large ports of money that people forget the Federal Election Commission actually has some safe harbor guidelines set up.
(05:39):
Theft is common enough acros political committees writ large that the FEC has says, if you have these internal controls in place, the committee and your treasurer may not be as liable both civilly and criminally as you might otherwise be. I want to get ahead of the PAC legal hotline here. But I remember going through those guidelines as a PAC director to say, "Hey, are we following what the government says are the best procedures to protect ourselves against theft?" And I'll just say this, it's one more reminder about the importance of audits, about the importance of outside reviews. Your PAC is a financial institution, it's a financial tool. And just like any small business, just like any large corporation, you should be doing audits, you should be reviewing your internal controls. If you start to listen to the news cycle that talks about theft and corruption and money and politics being subject to criminal actions, it can raise your anxiety level very quickly.
(06:31):
I would say come back down to earth and understand that there are policies and procedures that you can implement right now to lower your blood pressure on these kind of issues.
Micaela Isler (06:40):
Yeah. I mean, that's spot on. Something I know I've been talking about for a long time over two decades and one thing that I want to point out too is that in our most recent insight survey, we do ask about those internal controls and financial audits and compliance audits. And I just want to point out that over 70% of our members indicated that they either go through an annual financial or compliance audit or every other year at the end of an election cycle audit to make sure that they have the right financial controls in place. And so I think we've come a long way even in the last 25, 30 years where again, not required to have that, but it's a best practice and our members take that very seriously. And we've talked a lot about a lot of the other best practices and as our friend Amy Showalter says, better practices, but our PACS have implemented positive pay to sort of cut down on the fraudulent situation like we see with Arnold and Porter.
(07:38):
I sort of laughed at the suggestion of having two signers on a check over a thousand. I mean, we absolutely, our PACS have those tight controls in place because we know that because why? They have these financial and compliance audits that require that they have more than two signatures anytime you have a check over $1,000 among many other financial controls that are in place. And also, David, as we've talked a lot about on the show, while not required by the Federal Election Commission, our PACS are really run really like other trade associations or corporate boards where they have a board of directors that are elected, that they have fiduciary responsibility, they meet quarterly, there's an operating set of bylaws that the board has to adhere to. So our PACs are very professionally run and certainly as I remember our dear friend Carol Laham used to always say, "Don't try to skim off the pack because you're going to get caught." And the FEC always finds a way.
(08:36):
You do. And so really at the end of the day, I think that always room for improvement, no doubt, but I feel really good about where our PACs are, at least in the separate segregated fund community.
Adam Belmar (08:46):
So here we are. It is dangerously close to our nation's 250th birthday and we're having an important conversation on the facts about PACS. So important, I think that we need to be very clear that the right response to reading Brody Mullins piece over last weekend is not to just say, "Oh, that's not us. We're fine." I think the right response is to use it as a prompt, to use it the way that we are to have an honest conversation and make these points again, because that's part of the education mission, Michaela. Oh,
Micaela Isler (09:16):
Absolutely. And
Adam Belmar (09:17):
That's what we do.
Micaela Isler (09:18):
Absolutely. And we have a lot of new PAC managers that are coming into our profession and it's worth repeating over and over that there are best practices, there are controls in place and you ought to go make sure that you've got the right ones as well. And it's really kind of what at the heart of what we want to leave listeners with today. Stewardship of a PAC is not a passive responsibility. Your colleagues are trusting you with their hard-earned money, money that they contributed voluntarily because they believe in the mission of the organization. And so I say this all day, every day, that trust has to be earned and maintained actively through the controls you put in place. And it really is a selling point when we're out soliciting for our members that we do have those controls in place and the discipline to enforce them.
David Schild (10:11):
Yeah. Those three words, other people's money should always be sort of running through your head when you consider how you are managing a political action community, right? Because it's a real expression of trust when somebody in your organization says, "All right, you've convinced me that we need to be involved in the political process, here's some skin in the game in the form of my after tax dollars that I'm giving you, that's a big deal. Whether it's $5 a year or $5,000 a year, I mean, you've got a duty, you've got an obligation to be a good steward of that money. And keep in mind, we're not the only ones reading this. I mean, yes, this is some beltway insider type of news, but politics doesn't have a great reputation already. The last thing that we need is for contributors and potential contributors to wonder if their money is safe, to wonder if the system in which they're engaging is clean and the answer should be at our shop, it is because we do the following.
Adam Belmar (11:08):
And I think when you look at the FEC situation, the supposition that no quorum limited enforcement capacity lends you towards relaxing is just antithetical to what stewardship is about. It actually argues for more self-governance. When the external checks are weakened, internal controls matter more, not les. And I think our stewards, our PAC directors, our listeners truly, honestly believe that and that mission of compliance is even more important at a time when that external scrutiny isn't there. If you want to keep it tight, this is how you do it.
Micaela Isler (11:49):
Well, and that doesn't mean that the analysts aren't working and aren't reviewing the reports. And as our friend, the FEC chair, Shauna Broussard told our members at our conference last year, they're still reviewing reports and doing their due diligence. And so they may not be able to enforce anything right now because of the lack of a quorum. But don't think for a second as soon as they have that quorum, they're not going to come back and try to get through any of those issues that they find right now. So this is not a time to think that it's sort of open season at the FEC. It is not.
David Schild (12:22):
Yeah. You don't run the red light at night because the courts are closed at night. You're going to get caught. You're going to get in trouble, right? There should never be a conversation that somehow the door has been open to malfeasance. The FEC at some point will be back in force. And I don't think that that defense is going to play with your contributors either.
Micaela Isler (12:40):
No, no, no. Our members know that and I don't think any of our members think otherwise. But I will just reiterate that NAPAC has these resources on exactly the issues we're talking about, the best practices for PAC governance and internal controls and the compliance frameworks. And really, if there's ever a moment to pull those out and walk your team through them, your PAC boards, Brody Mullins headline is the moment. So not just because this piece indicts the business PAC community, it really doesn't. But when you look at the specifics, it just really does point towards making sure that these PACs are well run. And as we all know, we don't want to end up on the front page of any paper here in town or nationally.
David Schild (13:21):
Yes. And I would just ad something, Michaela, when our NAPAC summer intern is done putting the fresh coat of wax on your car, there's more hard work to do and Brandon, I mean, give a lot of credit to Brandon here, right? Came back after digging into this piece and gave us some analysis and it held up. And so great that we're sort of bringing on the next future generation of critical thinkers in the form of our NABPAC TFAS summer intern, Brandon. So hat's off, buddy.
Micaela Isler (13:50):
Yeah, he really did a great job.
Adam Belmar (13:52):
And he got two coats on there.
David Schild (13:54):
Exactly. Two coats always. Two coats always. He knows how the lady likes it.
Micaela Isler (13:58):
Well, with that, I just want to thank both of you for this really important conversation. And as always, thank you to everyone downloading and sharing the podcast. Subscribe and meet us right back here next week.