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Alleged Stanford fraud victims want money that was given to campaign committees

By Dan Eggen
Washington Post Staff Writer
Thursday, February 25, 2010; A21

It's bad enough for a politician or a party when a campaign contributor is accused of being a major league swindler. But what if the contributor's victims also want their money back?

Several Democratic and Republican campaign committees in Washington have been hit with a highly unusual federal lawsuit demanding the return of $1.6 million in political contributions, which are linked to R. Allen Stanford and his firm, the Stanford Financial Group.

Ralph S. Janvey, a Dallas lawyer appointed as the receiver of Stanford's estate, argues that the money, donated by Stanford or his associates, rightfully belongs to investors whom the financier is suspected of defrauding. The political committees "have no legitimate right to retain the funds, and the Receiver is entitled to the return of the funds for the benefit of the claimants injured by the fraud," Janvey's office said in a statement this week.

Stanford and his chief financial officer, James Davis, each face criminal fraud charges in connection with an elaborate $7 billion Ponzi scheme. The collapse of Stanford's Houston-based financial empire set off a scramble by individual politicians -- including President Obama and Rep. Charles Rangel (D-N.Y.) -- to give Stanford-linked donations to charity.

But the major party committees have ignored Janvey's demands for repayment, according to the lawsuit. The largest recipient of Stanford-connected funds was the Democratic Senatorial Campaign Committee, with $950,500, followed by the National Republican Congressional Committee ($238,500), the Democratic Congressional Campaign Committee ($200,000), the Republican National Committee ($128,500) and the National Republican Senatorial Committee ($83,345).

The lawsuit argues that since campaign contributions are essentially gifts -- and were not given in return for goods and services -- there is nothing barring the parties from returning the money. And here's the rub for the political committees: If they tried to argue otherwise, they would effectively be admitting to an illegal quid pro quo, legal experts said.

The lawsuit is certain to be monitored closely in campaign finance and bankruptcy law circles, not least because a handful of other prominent donors are in the middle of criminal fraud cases. Trevor Potter, president and general counsel of the Campaign Legal Center, said Janvey's legal argument in the case "is unprecedented, but that doesn't mean it will be unsuccessful."

"There are going to be a lot of people watching how this turns out," Potter said.

Mystery advocate

The battle over a new Air Force refueling tanker has dragged on for more than a decade, pitting Boeing against Northrop Grumman for the $36 billion contract. Now, a mysterious group has emerged with a unique solution to this federal contracting dispute: Let both companies win!

A group called Build Them Both popped up seemingly out of nowhere in recent days with a Web site and advertising campaign urging the Pentagon to award a split contract to both Boeing and Northrop, which is partnering with the Paris-based European Aeronautic Defence & Space (EADS) in its attempts to land the deal. Build Them Both says that such an approach would create 100,000 jobs at a time of economic distress.

But the nonprofit group refuses to say who is paying its bills. Carrie Giddens, a spokeswoman who has worked in Democratic politics, said that the group has "individual backers who have asked not to be named yet." She said that none of the aerospace companies or major suppliers are involved.

The group's overarching message, however, jibes with recent arguments by Northrop/EADS, which has been urging the Obama administration to consider a split contract. The consortium and its backers, including Sen. Richard Shelby (R-Ala.), angrily attacked new bidding parameters released Wednesday by the Pentagon that reportedly favor Boeing.

Boeing and Northrop say they have no connection to Build Them Both or its parent group, American Jobs Now. But Northrop spokesman Randy Belote acknowledged that the company welcomes the group's message.

"While Northrop Grumman has not contributed to this group, we don't see why anyone would not support efforts to produce tens of thousands of jobs in the U.S. at a time when jobs are needed most," Belote said.

This isn't the first time that a mystery group has emerged in line with Northrop's views. In 2008, a group called Citizens Against Government Waste launched a campaign in favor of awarding the contract to Northrop/EADS. According to a report at the time by The Washington Post, the group used a "fact sheet" that tracked word-for-word with a list distributed by Northrop.

Election stimulus

The 2010 elections are likely to shatter records for spending on midterm contests, according to an analysis from the Center for Responsive Politics, which tracks money in campaigns.

Using modeling based on previous midterm campaigns, the research group estimates the cost of federal elections Nov. 2 will surpass $3.7 billion. That's a 30 percent increase from the amount spent in 2006.

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