State Sen. Brian Kelsey, Nashville club owner indicted in campaign finance conspiracy
Tennessee Sen. Brian Kelsey has been indicted in a campaign finance conspiracy alongside a Nashville social club owner, the U.S. Attorney's Office in Nashville announced Monday.
A federal grand jury returned a five-count indictment charging Kelsey, 43, and club owner Joshua Smith, 44, with violating multiple campaign finance laws as part of a conspiracy to benefit Kelsey’s 2016 campaign for U.S. Congress.
Smith owns The Standard, an elite Nashville club that also operates its own state political action committee. There, the investigators allege, they illegally funneled money into Kelsey’s campaign on one occasion at a private dinner on July 11, 2016 through the club's PAC.
The Tennessean first reported on the questionable campaign finance donations in 2017. After The Tennessean’s 2017 report, a watchdog group filed a complaint with the Federal Election Commission and sent a letter to the U.S. Department of Justice saying Kelsey and others may have been involved in illegal straw donations, inappropriate coordination and other possible wrongdoing.
FROM 2019:State Sen. Brian Kelsey faces federal probe over campaign finances
FROM 2017:More Sen. Brian Kelsey campaign transactions hint at possible straw donor issues
THE STANDARD:Nashville's private club with a PAC
Kelsey, R-Germantown, and Smith are accused of secretly and illegally shuffling "soft money" from Kelsey's Tennessee state Senate campaign committee to his authorized federal campaign committee.
"Soft money" includes funds that are not subject to the limitations, prohibitions, and reporting requirements of the Federal Election Campaign Act. Federal law caps campaign donations to $2,700 from any one individual or organization to a single candidate in each election.
The indictment alleges Kelsey, Smith and other unindicted co-conspirators funneled tens of thousands of dollars between February 2016 and October 2016 to Kelsey's federal campaign for the 8th Congressional District.
In a brief news conference Monday afternoon, Kelsey and his attorney Ty Howard defended the senator. Kelsey called his charges "a political witch hunt" and blamed it on President Joe Biden and Democrats. The investigation into his campaign finances has been ongoing for years and started before Biden was president.
"I am totally innocent," Kelsey said.
Kelsey was the subject of a federal grand jury probe as early as 2019 when Republican President Donald Trump was in office. “I welcome any investigation because all donations were made in compliance with the law and on the advice of counsel," Kelsey said in 2019.
Howard refused to take questions during the news conference and said they wouldn't make any further comments pending the legal outcome.
Smith sent an email to The Standard members Monday morning. He said the PAC was dissolved in 2018 and said that $60,000 passed through the PAC and was contributed to a political organization, according to the email obtained by The Tennessean.
He told clients he was "an open book" about the investigation, which he is cooperating with, according to the email. He didn't acknowledge the charges he was facing.
A person answering the phone at the club said Smith was out of the country and unable to comment. His lawyer, Hal Hardin, told the Associated Press that he and his client “look forward to presenting our proof to an impartial jury and judge.”
Indictment: Ousted Rep. Jeremy Durham, Kelsey's wife involved
While only Kelsey and Smith were named in the indictment, several others were described by their jobs and relationships to the two, including ousted Rep. Jeremy Durham and Kelsey's wife.
One of the unnamed, unindicted co-conspirators was an attorney and member of the state House until getting expelled in 2016, according to the indictment. Durham, R-Franklin, was the only lawmaker expelled from the House during that period. It's unclear who the other unnamed, unindicted co-conspirator is.
Kelsey’s wife, Amanda Bunning Kelsey, isn’t named in the indictment but referred to as “Individual 1.” She was the Director of Government Affairs for the American Conservative Union and on its senior management team from 2015 through March 2017, where she managed the organization’s political expenditures during the 2016 federal election. The couple got engaged in July 2017 and married in January 2018.
The American Conservative Union is a national organization based in Virginia that advocates for conservative policies, ranks politicians based on their level of conservatism and organizes the Conservative Political Action Conference.
A spokesperson for the prominent nonprofit conservative organization told The Associated Press Monday that it has been “fully cooperating with this investigation since 2018.”
“We take compliance seriously, and are very proud of the work we continue to do to advocate for conservatism,” wrote Regina Bratton. “Neither ACU nor any member of the board is a subject or target of this investigation.”
Soft money was secretly funneled from Kelsey's Tennessee state Senate campaign committee to the American Conservative Union, according to the indictment. The money was then sent to Kelsey’s federal campaign.
The American Conservative Union, along with Kelsey's federal campaign committee, filed false reports of contributions to conceal the money, the indictment shows. The organization lied to the Federal Election Commission about ads it paid for in support of Kelsey, saying they were independent, according to the indictment. But the investigation showed that they illegally coordinated in secret with Kelsey and his agents, the indictment contends, according to federal authorities.
Bunning Kelsey, who previously worked as an assistant to U.S. Senate Majority Leader Mitch McConnell, R-Kentucky, signed a document filed with the Federal Election Commission related to the American Conservative Union’s $80,000 ad buy in support of Kelsey’s campaign. She now works for the Ingram Group.
Investigators determined the conspirators spent more than $106,000 of the state committee’s funds to influence Kelsey’s 2016 election. They secretly moved $91,000 to the American Conservative Union to fund advertisements for Kelsey, according to the indictment. The American Conservative Union also made $80,000 worth of hidden contributions, the indictment alleges.
The indictment outlines stealthy movements the conspirators made shuffling tens of thousands of dollars into Kelsey’s campaign through a complicated web of transactions.
Kelsey and Smith both face charges of conspiracy; illegally transferring “soft money” as a federal candidate and his agent; and illegally transferring “soft money” as a state officeholder and his agent. Kelsey also faces charges of making excessive contributions to a federal campaign and accepting excessive contributions.
A court issued a summons and Kelsey and Smith have both been told to surrender to the U.S. Marshals by Nov. 5 at 10 a.m. Both will then appear before a U.S. Magistrate judge. If convicted, each could face up to five years in prison and a $250,000 fine on each count.
Kelsey's role in the legislature
Kelsey has served in Tennessee General Assembly since 2009 and in 2016 ran unsuccessfully in a 10-way race for the Republican nomination for the 8th Congressional District. U.S. Rep. David Kustoff, R-Germantown, ultimately won the primary and went on to win the general election.
Since then, Kelsey has emerged as a leading voice in the Tennessee General Assembly on a range of conservative issues. He pushed for Gov. Bill Lee's education savings account program, a type of school voucher, and in his role as an attorney for the Liberty Justice Center even argued on for the program in court.
Earlier this year, he backed the law to ban the teaching of critical race theory in K-12 public schools in Tennessee and currently serves as the chair of the Senate Education Committee.
In that role, Kelsey serves on the steering committee for Lee's effort to overhaul how the state funds education. The Lee administration is starting a 90-day public comment period to gain input. But Monday's indictment could put Kelsey's role in that endeavor in jeopardy.
According to Senate ethics rules, an indicted senator who serves as a chair may request a hearing by the Committee on Ethics to determine whether he should be suspended from his position as long as the indictment is actively being pursued.
"If such Senator fails to make such request by the end of the tenth calendar day after the indictment, then the suspension will take effect and will continue as long as the indictment is being actively pursued, as determined by the Committee on Ethics," according to the Senate rules.
If Kelsey is convicted, he would no longer be qualified to serve in the state Senate.
“I am obviously saddened by this news. It is important to remember that under our laws, Senator Kelsey is innocent until proven guilty," Lt. Gov. Randy McNally, R-Oak Ridge, said in an emailed statement Monday. "He will have the opportunity to answer this indictment in the coming days. I have confidence in our judicial system and will reserve judgment and comment at this point in order to allow the process to unfold.”
Kelsey is the second sitting state senator facing federal criminal charges, both representing areas of Shelby County. State Sen. Katrina Robinson, D-Memphis, was found guilty of four counts of fraud after a two-week jury trial that ended Sept. 30.
Reporters Katherine Burgess and Cole Villena contributed to this report. The Associated Press contributed reporting.
Find reporter Rachel Wegner at rawegner@tennessean.com or on Twitter @rachelannwegner.