How Super PACs Could Be Scamming You Out of Your Money
Looks legit, but it's not. Liberty Action Group spends much of its money raising more money.

Editors' pick: Originally published Sept. 2.

CORRECTION: In an earlier version of the article, we said that Dan Backer had "run" several super PACs. He provided legal and compliance services. This change is reflected in the 10th paragraph.

Donald Trump supporters should be cheered by the fact that Liberty Action Group has raised upwards of $750,000 in 2016. Its website says right at the top that contributions go "directly toward spreading the message through the media" to support the Republican nominee.

But, in fact, most of the organization's resources don't appear to be going towards that goal. The entity has made exactly zero dollars in actual independent expenditures this entire year, and its last quarterly FEC filing discloses spending consisting almost entirely of telemarketing and other fundraising-related expenses. There are a series of disbursements to one of the principal organizers and registered agents for the group -- Josiah "Joey" Cammer -- and the largest expenditure, more than $450,000, is to an unidentified "Media Consultant." Chances are, it's a scam.

Politico this week made waves with a report recounting the story of a 25-year-old hacker who has made $1 million with a similar scheme, dangling a a chance for dinner with the Republican presidential nominee in front of unsuspecting donors in return for contributions. Sounds extreme in its unscrupulous nature, but it's not uncommon.

Super PACS, officially known as independent-expenditure only committees, have multiplied since the 2010 Citizens United decision, and with their rise has come a proliferation of schemes aimed at raking in dollars without putting the funds towards much, if any, political activity.

How Scam PACs Work

"We're definitely seeing large numbers of PACs that appear to be spending a very small percentage of their money on actual campaigning," said Ann Ravel, a commissioner at the Federal Election Commission.

Most so-called "scam PACs" operate in a similar manner.

They raise large amounts of money through small-dollar donations online or via direct mail, often by utilizing misleading tactics and over-the-top rhetoric to convince potential donors to contribute. They will send an email asking for a petition signature, only to redirect to a link for a donation, or ask for funds to help "draft" a particular figure into a political race. They egg donors on by telling them the need is "urgent," that "this can't wait." They also tend to target older Americans.

When you look at their finances, you begin to notice that upwards of 70, 80, even 90 cents of every dollar is going towards overhead costs, consultant fees and list rentals instead of being spent on advertising and campaigning.

For example, an analysis of 10 conservative PACs registered to Washington, D.C. political consultant Scott Mackenzie revealed 92% of a combined $17.5 million raised went to operating expenses. Mackenzie did not return request for comment.

A separate analysis of committees Alexandria, Virg.-based attorney Dan Backer provided legal and compliance services for showed that they spent more than 87% of a combined $8 million raised on operating expenses in 2014, including $419,000 to Backer's own firm, DB Capitol Strategies. This election cycle, one of the groups, Stop Hillary PAC, has raised about $1.5 million but spent only about $2,000 on direct contributions to political committees. It has spent less than a third of its funds on independent expenditures, where you might find ad buys, but a significant percentage of that has gone to political vendors for list rental fees and other expenses designed to drive online fundraising and promote the PAC. 

"This is characteristic of the 'churn and burn' style of fundraising prevalent among scam PACs that largely serves to line the pockets of the consultants and vendors running the federal political committee but does little to actually support candidates or win elections," said Ryan Call, a Denver election lawyer and former chairman of the Colorado Republican Party.

Backer contends the criticism of his groups is unfair and that he and those like him are being targeted by those in the traditional campaign fundraising system who feel threatened. He noted that the Stop Hillary PAC was unable to list its expenses as independent expenditures until Clinton officially announced her presidential run.

"Grassroots costs more," he said. Consultants exist in lieu of staff, and renting lists, paying for advertising and spending on fundraising are necessary to get out the message.

"It's only natural that the B-side of any political communication is a solicitation for funds to those who like, agree, share your view to help you further that view by sending more messages to more people to engage them in the political movement you are building," he said. "Otherwise, you don't have money to rent lists and engage in political messaging to advance your movement, and it quickly stops."

Backer is the treasurer of Great America PAC, a group supporting Trump's candidacy. Thus far, the group has brought in about $5.4 million and spent around $6.6 million. It has employed some unique campaign tactics this election cycle, including running direct-response 1-800 ads to get donations and data.

Backer does not deny that there are some bad actors out there. He pointed to Liberty Action Group and another organization, American Priority PAC, both of which are registered under treasurer Henok Tedla, a Virginia-based accountant. American Priority's website claims to be a group of "young, business-minded millennials whose entire purpose is to empower you to vote Trump." The donate link on the page is broken, and it has not yet filed any contributions or expenditures with the FEC. Liberty Action, as previously mentioned, appears to have brought in $786,567 in donations and lists no committee contributions or independent expenditures. Neither group responded to request for comment.

Who Scam PACs Target

The right has been particularly plagued by the scam PAC phenomenon, thanks at least in part to the Tea Party. In the grassroots movement some saw an opportunity to solicit funds from a new universe of donors who have never before really been involved in politics.

"They're unfortunately susceptible to over-the-top, overheated rhetoric designed to drum up outrage directed towards those in power and, in turn, extract contributions from them," said Call.

The GOP is more ideologically fractured than the Democratic Party, giving way for scammers to solicit funds not only against Democrats but also against their fellow Republicans. The New York Times in October 2015 examined the phenomenon of grassroots and Tea Party conservative groups targeting Republicans like Speaker of the House Paul Ryan, California Representative Kevin McCarthy and Senate Majority Leader Mitch McConnell.

The conservative media's consistent railing against and skepticism of traditional institutions has added fuel to the fire, leaving donors eager to find avenues to filter their money other than the more typical organizations they have come to distrust.

"The left is largely in agreement on what their political and policy goals are, and so there's not as much space for this," said Paul Jossey, a campaign finance lawyer.

Jossey knows the system well -- he previously worked for Backer and recently outlined his experience in Politico Magazine. "I suspected that the things that we were doing there didn't meet a high ethical standard," he told TheStreet.

How Scam PACs Could Actually Be Hurting Trump's Candidacy

Trump's campaign has had trouble raising money. Including super PACs, it has raised about $127 million, according to OpenSecrets.org (by comparison, Clinton's campaign and associated groups have raised about $435 million). Scam PACs could account for some of this disparity. 

One of the best-known scam PAC cases in recent history is that of Allen West, the former Florida congressman who in 2012 filed a complaint with the FEC alleging several scam PACs defrauded conservative donors by using his name and likeness in fundraising pleas without supporting him with the money, eventually costing him the election.

When unsuspecting supporters give money to Stop Hillary PAC that they think is going to help get Trump elected, that's money the campaign does not get.

In the case of West, the FEC ultimately determined no campaign finance laws had been broken -- exemplifying another gaping and surprising reality about scam PACs: there's little the authorities can do about them.

What Can Be Done about Scam PACs?

Candidates themselves can file complaints or send cease-and-desist letters to entities they believe are unfairly using their names (the Trump campaign sent such a letter to the dinner-offering group). The Department of Justice and local law enforcement can prosecute cases of obvious fraud. However, the FEC can't go after scam PACs on its own.

"We ourselves don't have authority to do anything," said Ravel, the FEC commissioner, who has pushed Congress for legislation giving the FEC the ability to protect PAC donors.

According to Paul S. Ryan, campaign finance expert and deputy executive director at the Campaign Legal Center, the problem is about to get worse, as a federal appeals court recently struck down an FEC rule that bars super PACs from using candidates' names in their titles.

"That was the FEC's best tool to try to clamp down on scam PACs," he said.

With federal authorities having limited ability to prevent scam PACs from taking advantage of voters, some in the media have attempted to call attention to the issue, but as Jossey notes, few on the right -- which conservative donors are more likely to trust -- have been willing to speak out. "It is absolutely shameful the lack of reporting on this from the right and from the conservative media," he said, noting that The National Review's Jonah Goldberg, The Resurgent's Erick Erickson and Daily Caller are exceptions.

In fact, it's been speculated that one campaign in the Republican primary was itself a money-grabbing ploy by consultants. Ben Carson's presidential campaign raised a tremendous amount of money, but most of it went to consultants and more fundraising. Carson himself seems to have left the door open to his effort being more scam than campaign.

Unless laws change so that the FEC or others can act, it is largely up to donors to pay attention to where they are sending their money. For small-dollar donors especially, the safe move may be giving to candidates and party committees directly, or going to websites like OpenSecrets.org to see how funds are being spent.

"It does come down to the individual who is giving their money to know where your money goes," said Jossey.

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