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Expert: Money trail shows possible misconduct by state Sen. Brian Kelsey

Dave Boucher Joel Ebert
The Tennessean
Transactions in summer 2016 show money going from Sen. Brian Kelsey’s state campaign account to a federal advocacy organization about the same time the advocacy organization bought radio ads supporting Kelsey.

There’s a money trail leading from the state campaign coffers of Sen. Brian Kelsey to radio advertisements used by an outside group to buoy his unsuccessful 2016 congressional bid, according to the findings of a USA TODAY NETWORK - Tennessee investigation.

The issues illustrate campaign finance concerns across the country: How do regulators effectively police the flow of state campaign funds into federal races, a purportedly banned practice?

Kelsey’s trail involves the use of political action committees controlled by a private Nashville club, a prominent but controversial GOP donor and a well-known conservative advocacy organization. It also may indicate illegal conduct by Kelsey and others, an expert said.

“There’s certainly enough smoke here to open an investigation to determine if there’s fire, because it sure smells like fire,” said Brendan Fischer, an attorney and Federal Election Commission reform program director with Washington, D.C.-based Campaign Legal Center.

But a different expert said illegal conduct may be hard to prove.

“Ties don’t always mean there’s fire,” said David Mitrani, a Washington, D.C., attorney and campaign finance expert.

The money trail

The transactions in summer 2016 show money going from Kelsey’s state campaign account to a federal advocacy organization about the same time the advocacy organization bought radio ads supporting Kelsey.

Kelsey gave $106,000 of state campaign funds on July 11 to The Standard Club PAC, the largest contribution ever received by the members-only Nashville dinner club’s political arm.

►Read more:Nashville's private club with a PAC

The Standard Club PAC then gave $30,000 on July 15 and an additional $7,000 on July 20 to a federal PAC called Citizens for Ethics in Government, a group founded by controversial Tennessee GOP donor Andy Miller.

Also on July 15, The Standard Club PAC gave $30,000 to the federal PAC for the American Conservative Union, a national political organization that advocates for conservative policies.

Miller’s federal PAC took the $37,000 given to it by The Standard PAC — the only contribution it received that financial quarter — and gave all but $1,000 of it to the ACU PAC on July 21.

The same day, the ACU announced it had created a radio advertisement in support of Kelsey.

The ACU eventually spent $80,000 on radio ads in the Memphis and Jackson markets in support of Kelsey, according to FEC and local radio files. All of the airtime was purchased for late July and early August, days before the GOP primary and after The Standard Club PAC and Miller’s PAC donated money to the ACU.

In February, Brent Ferguson, an attorney for the Brennan Center for Justice, a public policy and law institute at New York University Law School, told the USA TODAY NETWORK - Tennessee he thought Miller’s actions raised questions.

“For some reason it sounds like this donor wants to funnel money to this club,” Ferguson said.

Another connection

Aside from the connections between Kelsey, Miller and The Standard PAC, there’s another person with ties to the various actors involved: Thomas A. Smith.

Commonly known as Thomsen Smith, the Vanderbilt University graduate has been a prominent political fundraiser in Tennessee for several years.

On his LinkedIn page, he lists his job with Thomsen Smith Fundraising as a “professional pick-pocket.”

“Check your back pocket. Not kidding,” he writes.

Since 2003, Smith has run RAAMPAC, former Lt. Gov. Ron Ramsey’s political action committee.

In an April interview, Ramsey said Smith was the person who encouraged Ramsey to use campaign funds to buy a membership with The Standard Club.

Smith’s fundraising prowess was tapped for various campaigns, including the presidential campaigns of Lamar Alexander and Fred Thompson, the U.S. Senate races for Bill Frist and Thompson, and several congressional bids, including Joe Carr. He’s also raised money for the National Republican Senatorial Committee, the GOP campaign arm used for U.S. Senate races across the country.

Smith was paid $52,000 for working on Carr’s 2014 U.S. Senate campaign. Miller was a key Carr donor, drawing scrutiny from the FEC after Carr invested $200,000 of campaign funds into Miller’s private business. The same acts at the state level with Miller and expelled lawmaker Jeremy Durham prompted legislative reforms this year.

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Smith was also a fundraiser for Kelsey on his congressional bid. Kelsey paid him nearly $31,000 for “fundraising commissions.”

Kelsey wouldn’t answer why he gave The Standard Club PAC more than $106,000.

“My campaign and I had no discussions with Standard Club PAC or its representatives regarding how my donation could or should be used, and I don’t know who or what Citizens for Ethics in Government is,” Kelsey said.

Smith declined to comment.

The ACU, Miller and Josh Smith, owner of The Standard Club and PAC operator, did not respond to requests for comment for this story.

Why the deal could be improper

Kelsey and the political action committees may have committed several election law violations, Fischer said.

The money from Kelsey’s state campaign account could violate a ban on what’s known as “soft money” contributions. In essence, Fischer said federal candidates can’t use money raised for state political campaigns in federal races, according to federal election law.

“If the intention was to transfer these state funds into federal elections, particularly into federal elections to benefit Kelsey, there could be an argument that Kelsey violated the soft money restrictions,” Fischer said.

Possible inappropriate coordination between Kelsey and the other parties may have occurred as well, Fischer said. But coordination, in the eyes of the law, is different than the appearance of campaigns inappropriately working with outside groups, Mitrani said.

“What it would take here is evidence that the candidate either initiated or directed the transfer of money,” Mitrani said.

Fischer agreed that simply transferring money doesn’t necessarily amount to coordination, and inappropriate coordination is a high bar to meet in the eyes of the law. However, he said the timing and nature of the transfers in the case of Kelsey, The Standard Club PAC, Miller’s PAC and the ACU suggest there were more than “casual conversations” between everyone involved.

“This has every appearance of being a conspiracy to funnel funds from Kelsey’s state accounts into independent expenditures to benefit his congressional race,” Fischer said.

Mitrani said similar interactions occurred in other races in other states, with little FEC action to date. Fischer said a violation could be uncovered through an investigation.

Beyond possible inappropriate coordination, Fischer said Kelsey, the club PAC and Miller may have violated straw donor regulations. A straw donor is someone donating money on behalf of someone else, a practice prohibited at the state and federal level.

If Kelsey used The Standard Club PAC and Miller’s PAC as a conduit to get money to the ACU, Fischer said there are straw donor ramifications for everyone involved.

If the FEC investigates and confirms wrongdoing, Fischer said it could levy fines. However, if it finds there was willful and knowing violation of federal law, Fischer said, the U.S. Department of Justice could start its own investigation.

Reach Dave Boucher at 615-259-8892, dboucher@tennessean.com and on Twitter @Dave_Boucher1. Reach Joel Ebert at jebert@tennessean.com or 615-772-1681 and on Twitter @joelebert29.