RNC failed to report $3 million in debt; Steele aide accused of obstruction

An aide to Chairman Michael Steele hid invoices and had staffers withhold information, the RNC's treasurer said.
An aide to Chairman Michael Steele hid invoices and had staffers withhold information, the RNC's treasurer said. (Ethan Miller/getty Images)
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By T.W. Farnam
Thursday, July 22, 2010

The Republican National Committee filed amended financial reports Tuesday showing about $3 million in debt for April and May that was previously unreported.

RNC Treasurer Randy Pullen said in a memo to the party's budget committee that he had discovered unpaid bills for telemarketing, legal consulting and other services. Pullen accused RNC Chairman Michael S. Steele's chief of staff of hiding invoices and telling staff members to withhold information from Pullen.

A political party must report an invoice as a debt to the Federal Election Commission if it's undisputed and remains unpaid for 60 days past the date the services were rendered.

"The committee will continue to work very closely with our legal counsel and our treasurer to ensure that the RNC meets all FEC reporting requirements, as it has always done in the past," RNC spokesman Doug Heye said.

Heye rebutted Pullen's claim that RNC staff members were told not to give him information on the debt. "I don't know where that comes from," Heye said. "Staff is available to any member of the RNC, and we are available to them 24 hours a day."

The committee has also tapped two outside lawyers and an accounting firm to review its policies following earlier revelations about its bookkeeping.

The financial reports filed Tuesday night show that the money available for the November elections has been shrinking over the past three months, Pullen wrote in his memo, which also warned of other problems.

"It has been clear to me and others at the RNC since early March that fundraising has been falling well short of budgeted numbers," he wrote. "In addition, costs of fundraising for major donor and direct marketing have been well above that budgeted going back to last year."

The $3 million in debt was paid off in May and June. The RNC reported $10.9 million on hand and $2 million in debt at the end of June. That's a slightly better financial position than the Democratic National Committee, which had $11 million in cash and $3.9 million in debt.

The RNC's finances have been a source of controversy recently, after it was reported in March that the party paid a nearly $2,000 tab at a bondage-themed night club, and large donors have directed their contributions elsewhere.

"Failure to disclose debt is a common violation, but the FEC is likely to take this very seriously," said Brett Kappel, a campaign finance lawyer with Arent Fox who has worked for candidates from both parties. "A failure to report a debt of that magnitude doesn't let the public or the candidates or the opposing party know the true financial state of the committee."

The RNC is likely to face a civil penalty for the amendment, but it should be well below $1 million, Kappel said.

Last month, the National Republican Congressional Committee paid a $10,000 fine after filing inaccurate financial reports, attributing the error to a former treasurer who has been accused of embezzling the committee's money.

Steele's former Maryland Senate campaign also filed a report with the Federal Election Commission this month. It showed the campaign had $136 in the bank and $51,000 in debt.

Staff writer Felicia Sonmez contributed to this report.

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