Report: Is David Brock’s Super PAC Engaged In A Fraudulent Payroll Scheme?
by Andrew Kerr
The Citizen’s Audit
- American Bridge 21st Century Super PAC has received $7.6 Million from its dark money Foundation arm since 2011.
- Is this money being spent honestly?
- The numbers speak for themselves.
David Brock is at it again.
From individual users on social media to the highest levels of government, Brock aspires to deploy his network of organizations to contest conservatism in every aspect of our society.
The longtime liberal operative held a fundraising conference in late January where he solicited over $40 million from 120 top donors for his “Democracy Matters” initiative.
The Washington Free Beacon obtained a confidential memo distributed at the retreat that outlines Brock’s four year plan to unleash his network to fight back against President Trump and Republicans.
- American Bridge 21st Century – Super PAC & Social Welfare 501(c)(4)
- Will defeat Trump “either through impeachment or at the ballot box in 2020.”
- Will “measurably impact US Senate, gubernatorial, and state legislative races.”
- Will bypass campaign finance restrictions by distributing content to voters online.
- Media Matters for America – Nonprofit 501(c)(3)
- Will “expose” individuals they consider to be “serial misinformers inhabiting everything from social media to the highest levels of government.”
- Will pressure Google, Facebook, and other internet platforms to shut down “fake news” sites.
- Will “punish and halt” social media users that “poison our national discourse.”
- Shareblue – Private Media Organization
- Will “take back social media for Democrats” by becoming the “de facto news outlet for opposition leaders and the grassroots.”
- Will “force” Trump allies to step down or change course due to “news” pushed by Shareblue.
- Will “pressure” Democrats to “take more aggressive positions against Trump.”
- Citizens for Responsibility and Ethics in Washington D.C. (CREW) – Nonprofit 501(c)(3)
- Will demand ethical conduct from the Trump administration.
- Will take legal action against the Trump administration when the law is broken.
- Will make the use of dark money, campaign finance violations, and ethics abuses a major issue in the 2018 and 2020 elections.
David Brock aims to be at the center of the opposition against Trump, and by all means he’s free to engage in that effort. However, if he wishes to exert such an intense degree of political influence upon everyday Americans, it’s critical that he do so within the rule of law.
Unfortunately, after analyzing the relationship between Brock’s tax-exempt charities and political organizations, a number of ethical and potentially legal issues are brought to the forefront.
This report is the first in a series that will unravel the complexity of David Brock’s network, starting with American Bridge 21st Century Foundation and its Super PAC.
AMERICAN BRIDGE 21ST CENTURY
American Bridge 21st Century is comprised of two separate business entities – American Bridge 21st Century Super PAC (the “Super PAC“), and American Bridge 21st Century Foundation (the “Foundation“).
The key difference between the two entities is their donor disclosure requirements.
The Super PAC reports to the Federal Election Commission (FEC), and is required to disclose who gives them money. For example, we can see here that George Soros gave $1,000,000 to the Super PAC last March.
The Foundation reports to the IRS. As a 501(c)(4) social welfare nonprofit, the IRS does not require the Foundation to disclose the identity of its donors, hence the term “dark money”.
Since one entity reports to the FEC, and the other reports to the IRS, there’s potential for abuse.
THE FOUNDATION HAS TRANSFERRED OVER $7 MILLION INTO THE SUPER PAC SINCE 2011
From 2011 to the end of 2015, the Foundation funneled $7.6 Million into the Super PAC. The Foundation isn’t required to disclose who donated that money, so we will never know who donated those dollars.
Despite millions being passed through to the Super PAC, not once has the Foundation disclosed any of the transfers to the IRS in its end of year tax filings. See for yourself: (H1 2011)(2011)(2012)(2013)(2014)(2015)
The only way to view the transfers is by reviewing the Super PAC’s filings with the FEC.
The sheer amount of funds being transferred out of the Foundation into the Super PAC is alarming. For the past couple tax years, transfers to the Super PAC consisted of over 50% of the Foundation’s total expenditures.
This immediately raises concerns – why is so much dark money being funneled into the Super PAC?
IS IT LEGAL FOR THE FOUNDATION TO FUNNEL DARK MONEY INTO THE SUPER PAC LIKE THIS?
The answer to that is maybe. It all depends on the percentage of salary expenditures spent on Foundation activities.
American Bridge came under fire in 2012 when campaign finance experts questioned why the Super PAC received $240,000 from the Foundation.
At the time, representatives for American Bridge said the transfers were not donations, instead, they were “reimbursements from the nonprofit to the Super PAC to cover administrative costs.”
WHY IS THE FOUNDATION REIMBURSING THE SUPER PAC?
It turns out that the Foundation has a pretty extensive cost sharing agreement with the Super PAC.
The last time the Foundation disclosed their cost sharing agreement to the IRS was in 2012.
The two organizations share the same pool of employees under a “common paymaster” arrangement.
The Super PAC manages salary and payroll taxes for both organizations, and pays employees 100% of their wages with one consolidated paycheck.
The Foundation then “offsets” the Super PAC’s expenditures for the time their employees spent on Foundation activities, in addition to any applicable payroll taxes.
For example:
- John Doe works for American Bridge, and earns $1,000 per pay period.
- John Doe spends 70% of his time working for the Super PAC, and the remaining 30% of his time working for the Foundation.
- Each pay period, John Doe receives one consolidated paycheck from the Super PAC for $1,000.
- The Foundation reimburses the Super PAC with a $300 offset for the time John Doe spent at the Foundation.
THE FOUNDATION HAS ZERO DEDICATED EMPLOYEES
Here’s where things start to get interesting.
The Foundation has reported a grand total of zero employees since its founding in 2011.
Tax filings from 2011 to 2015 indicate that the Foundation spent $6.5 million on employee salaries and payroll taxes.
Since the Foundation has zero employees, every dollar spent on payroll was routed to the Super PAC as a reimbursement under the common paymaster agreement.
As shown in the chart below, there’s a clear correlation between the reported salary expenses of the Foundation and the total amount of funds transferred to the Super PAC.
The little amount that’s not accounted for in the chart above would be expenditures for shared office space and supplies.
COMPARING THE FOUNDATION’S SALARY EXPENDITURES WITH THE SUPER PAC’S
We’ve established the following:
- As the common paymaster, the Super PAC pays all employees 100% of their wages with one consolidated paycheck.
- The Foundation, which has zero dedicated employees, reimburses the Super PAC for its share of salary expenditures.
If we compare the total salary expenses reported by the Super PAC with the reimbursements provided by the Foundation, we can deduce the percentage of salary expenditures allocated to Foundation activities.
What’s striking here is the irregularity of American Bridge’s total salary expenses put up against the consistent increase in Foundation-only salary expenses.
- March 2011 to June 2011: 7.43% of American Bridge staff expenses reportedly spent on Foundation activities
- July 2011 to June 2012: 13.93%
- July 2012 to June 2013: 30.56%
- July 2013 to June 2014: 24.04%
- July 2014 to Dec 2014: 43.72%
- Jan 2015 to Dec 2015: 37.29%
WHAT ARE YOU GETTING AT HERE?
The legality of the Foundation’s funneling of dark money into the Super PAC is determinant on the honesty of the American Bridge’s expense reporting.
It’s possible that the Foundation is falsifying the true number of hours worked by employees in an effort to hide the transfer of dark money into the Super PAC. It wouldn’t be the first time something like that happened.
The importance of proper timekeeping by shared employees between a 501(c)(4)and a PAC is “critical” to ensure administrative compliance, according to Bolder Advocacy.
For example, to ensure compliance, American Bridge would need to produce timesheets from each employee for every pay period from July to December 2014 proving that 43.72% of staff expenditures were incurred by the Foundation.
Any amount overpaid by the Foundation would constitute a contribution to the Super PAC, something the IRS would require disclosure of.
If any such contributions took place, American Bridge could face a litany of legal and compliance issues from the IRS and FEC.
WHAT WOULD BE THE FOUNDATION’S MOTIVATION FOR OVERPAYING STAFF EXPENDITURES?
Easy – let’s say someone wants to support American Bridge Super PAC, but doesn’t want his name disclosed publicly.
That person could donate to the Foundation, shielding his identity from public disclosure.
The Foundation would send the donation directly to the Super PAC under the guise of an expense reimbursement.
The IRS doesn’t consider cost-sharing reimbursements to be donations, so the Foundation wouldn’t be required to disclose the “donation” to the Super PAC.
ON WHAT GROUNDS ARE YOU CLAIMING THAT AMERICAN BRIDGE IS FALSIFYING EXPENDITURES?
There’s no way for us to know for sure without a thorough review of American Bridge’s employee timesheets.
What we can do is look at what the Foundation has done with all that money.
The Foundation has a YouTube channel, with most of its videos pulling less than 100 viewers.
Ask yourself: does this look like the the result of $6.5 million in staff expenditures?
The Foundation also publishes “research” reports on its website.
On the surface, these reports seem impressive – some are over 100 pages.
But when you actually read the reports, it becomes very clear that they’re really just one step away from plagiarism.
Take a look at this report published September 2015, titled “Conservatives’ Road Map To Another Republican Shutdown“.
The entire report is like this – it’s a 21 page copy-paste job with no original content or insights.
All of the Foundation’s reports are like this – quoted content from other outlets with no original content. David Brock should be ashamed of himself for passing this nonsense off as “research”.
Ask yourself: does this look like the the result of $6.5 million in staff time?
SUMMARY
American Bridge 21st Century Foundation funnels millions of dollars into its Super PAC for reimbursed staff time.
For example, from July to December 2014, the Foundation reimbursed the Super PAC for 43.72% of its salary expenditures.
But the result of the Foundation’s work does not appear to match the amount of money spent to produce it.
If the Foundation is falsifying expenditures and overpaying the Super PAC, American Bridge could face a litany of legal and compliance issues from the IRS and FEC.
Only with a thorough review of American Bridge’s employee timesheets can we verify if the Foundation has been honest in its reported salary expenditures. Consider signing our petition to the IRS and FEC to audit American Bridge and the rest of David Brock’s network.
What do you think?
Do you think the Foundation is reporting its expenditures honestly?
Ethically, do you think a Super PAC should be able to share its employees with a nonprofit organization to such a degree?
We are curious to hear your thoughts about all this in the comments below.
Thank you for reading!