Unpacking Rory Reid’s 91 PACs Maneuver

How political reporter Jon Ralston got the story

If this isn’t illegal, it should be. This has been the “almost universal” reaction, says veteran Nevada political reporter Jon Ralston, to the news he broke March 4 on his “Ralston’s Flash” blog with this arresting headline:

“Rory Reid’s gubernatorial campaign circumvented contribution limits, created 91 shell PACs to infuse $750,000 into campaign.”

Where there are campaign finance laws, there are work-arounds. (On Monday, The New York Times reported on “holes” in Illinois’s new campaign finance law, as demonstrated during Chicago’s recent mayoral race. I did a roundup in January of reports on how likely Republican presidential contenders are skirting campaign donation limits.) And as a seasoned political reporter and self-described campaign finance report “obsessive” in a state with, in Ralston’s words, “a Swiss cheese amalgam of statutes that allow all manner of nonsense,” Ralston knows from loopholes. Still, Ralston told me in a recent interview, “In all the years I’ve looked at these reports, I’ve never seen anything like this.”

“This” being the following (as described by Ralston in the first four paragraphs of his March 4 report):

In one of the most brazen schemes in Nevada history, gubernatorial candidate Rory Reid’s campaign formed 91 shell political action committees that were used to funnel three quarters of a million dollars into his campaign, circumventing contribution limits and violating at least the spirit - and maybe the letter - of the laws governing elections.

Reid, who was fully aware of what was done, essentially received more than $750,000 from one PAC - 75 times the legal limit — after his team created dozens of smaller PACS that had no other purpose other than to serve as conduits from a larger entity that the candidate funded by asking large donors for money. Indeed, the shell PACs were formed in the fall and dissolved on Dec. 31, after they had served their short-term function, which was to help the candidate evade campaign contribution laws.

Reid solicited donations for the Economic Leadership PAC, which raised more than $800,000 over a five-month period - donations that were then disbursed in $10,000 increments to dozens of other PACS, which quickly funneled the money back to the candidate’s campaign account.

Records show many of the PACS had names implying rural provenance -such as the Douglas County Committee for Change and Lyon County Leadership Fund - but they all had the same Las Vegas residential address before being quietly dissolved after the election. The money laundered through these PACS often resided there only for a couple of days, a transaction that was needed to, they believed, comply with contribution limits on a technicality. The Reid campaign could then quickly make use of the money in a futile attempt to salvage his faltering gubernatorial bid.

It may sound simple—the “records show”—but here is what connecting the dots required in this case: The savvy (and time) to download and peruse Rory Reid’s campaign finance report at the Nevada secretary of state’s website and notice a single residential address popping up again and again—attached always to PACs with inconspicuous names each of which made a $10,000 donation to Reid’s campaign, the maximum permitted by law (in some cases, the donation was $9,980); then, to search and download one by one from the web site reports from each of these PACs and notice that the only activity reported for each was a $10,000 infusion from the Economic Leadership PAC (which, upon further searching, you might discover is Reid-affiliated), followed by, a few days later, a $10,000 donation to Reid’s campaign. And, to complicate your records review, some of the PACs wouldn’t come up at all in a search because, as Ralston learned, many of them had been dissolved at the end of 2010 and, Ralston says he discovered, a “quirk in the law” allows dissolved PACS to be removed from the website entirely.

Ralston is careful when I ask him to walk me through exactly how he pieced this all together, stressing that “this is very, very sensitive because of who is involved” (Rory Reid is the son of Senate Majority Leader Harry Reid; the person now charged with investigating this, Nevada secretary of state Ross Miller, is a Democrat with supposed Senate ambitions.) Part of getting this story, says Ralston, “had to do with my experience. Part of it is having the access to the right people to be sure I’ve connected the dots in the right way. And it helps to be obsessed with these reports.”

It also helps to work for a news organization that will pay you to spend time sifting through these documents, something Ralston concedes “only the major papers have the kind of investigative resources to even think about,” adding that even then “they may decide to devote the resources to something else because this is kind of esoteric.” Ralston contributes thrice-weekly columns to the Las Vegas Sun (which also runs, online, his “Ralston’s Flash” blog), he publishes a “daily e-mail newsletter containing insider political and business information,” and hosts a nightly TV news show, Face to Face.

When Ralston reached out to Reid for his initial story, “[Reid] essentially said, ‘I know you go through these reports, we disclosed all this, I’m not surprised you found out,’” says Ralston. “But I think they were surprised.” Said Reid then to Ralston, “If it’s a statement on anything, it’s a statement on the failure of campaign laws. This was not done in the dark of night. We disclosed everything we did.”

Reid continued to sound these same points—we complied with the law, this was all disclosed—when he appeared on Ralston’s TV show, Face to Face, the day Ralston’s report broke. (Ralston says consultants working with Reid called him prior to Reid’s appearance “to try to feel me out on what kind of questions I was going to ask.”) The entire Face to Face segment is worth a watch—Ralston is tough and combative, Reid is unrepentant, calmly sticking to his talking points—but here is a taste of what transpired:

RALSTON: [The PACs] are shells. They’re phony.

REID: They’re not phony. We complied with the law.

RALSTON: The Humboldt County Progressives PAC: that have anything to do with progressives in Humboldlt County?

REID: I’m sorry if you don’t like the names of the PACS

RALSTON: It’s misleading, that’s why I don’t like it.

REID: We didn’t mislead anyone.

Another moment:

REID: This is more of a statement on Nevada election law than on my campaign.

RALSTON: It’s easy to take advantage of? Is that the statement?

And, another:

RALSTON: You figured out a way to get around the laws.

REID: I’m not proud of that. I’m proud of the way I comported myself. When I was confronted with this issue, I asked for legal advice, I received it, I got confirmation from the secretary of state’s office, I was comfortable it was transparent, and we moved forward. And if the law should be changed, then someone in the legislature should change it.

(This may actually happen. More on that later.)

“Transparent” was Reid’s mantra during his Face to Face appearance. Indeed, what Reid’s campaign did was so transparent that a seasoned political reporter/campaign report “obsessive” didn’t see it until five months after the election. Twice during the show, Reid actually almost taunted Ralston for not reporting this sooner. “Most of this information was available in October, before the election,” Reid said. “I don’t know why you’re writing about it in March. This was available in October.” And later, “You and everyone else had the opportunity to cover this during the campaign,” to which an agitated Ralston replied, “I was busy covering your father’s race!”

By appearing on Ralston’s show, Ralston guesses, Reid was hoping to “make sure this wasn’t fatal, to nip this in the bud.” Ralston has been working to keep this on Nevadans’ minds, having written several subsequent Sun columns and blog posts on the matter.

From one:

Rory Reid kept using the word “transparent” last week to describe an elaborate ruse so he could accept a $750,000 contribution from a single political action committee — 75 times the legal limit.

He’s right. It was transparent. But not in the way he means it.

This was a transparent attempt to find a loophole in the campaign contribution laws by a gubernatorial candidate apparently desperate for money to try to revive his moribund campaign. And it was specifically designed to be opaque— a master PAC created with a name that belied its true purpose and 91 phony entities with names concocted to mislead.

And, from another:

Shouldn’t this be illegal?

Not if you think California entrepreneur Steve Bing should be able to give $200,000 to Rory Reid’s campaign or if you believe gaming companies and unions should be able to give well over the statutory limit to a candidate. That’s what happened.

And it’s now exposed because these conspirators used a fig leaf to conceal a massive political money laundering operation.

Recall that Reid suggested the Nevada legislature might want to revisit the state’s campaign finance laws (in light, I guess, of how his campaign was able to work around them). On March 1—before this story broke—Secretary of State Ross Miller pitched to the legislature a transparency-boosting campaign finance reform bill. Here’s how Miller has characterized the current laws:

That often repeated definition of insanity, doing the same thing over and over and getting the same negative results, may well apply to Nevada’s campaign finance laws. Year after year Nevada receives failing grades in objective studies of campaign finance laws. The Campaign Disclosure Project of the UCLA School of Law, the Center for Governmental Studies and the Pew Charitable Trusts all gave Nevada an “F” in 2008 for the state’s campaign disclosure law, electronic filing program and disclosure report accessibility, the same grade Nevada received in the Project’s previous four reports.

It’s time to stop the insanity, and it’s not a difficult thing to do. Tomorrow, I will present a legislative package that will increase the transparency and accessibility of information on candidate and political action committee (PAC) campaign contributions and expenses.

The Sun has editorialized in support of Miller’s proposal, writing that it “would provide a healthy dose of needed transparency, and it would give the voters more information.”

And speaking of more information: in observance of National Sunshine Week (that’s this week), the National Institute on Money in State Politics has published a guide to “Best Practices For State Campaign Finance Disclosures,” citing various states for doing different things well. Not among them: Nevada.

Liz Cox Barrett is a writer at CJR. Tags: , , , ,