New federal complaints: State Sen. Brian Kelsey, other lawmakers broke straw donor laws

Federal authorities are poised to probe a series of potentially illegal donations and contributions involving state Sen. Brian Kelsey, five other state lawmakers — including House Majority Leader Glen Casada — and four political action committees.

The flow of money into and out of Kelsey's failed 2016 congressional bid is the subject of a complaint filed Wednesday with the Federal Election Commission and a letter sent to the U.S. Department of Justice.

The complaint and letter stem from a USA TODAY NETWORK-Tennessee investigation earlier this month that found Kelsey and others may have been involved in illegal straw donations, inappropriate coordination and other possible wrongdoing.

“In order to disguise the illegal transfer of prohibited state money into his federal race, it appears that Kelsey concocted another illegal scheme to pass the money through a dark money daisy chain and straw donor reimbursement scheme," said Brendan Fischer, an attorney and Federal Election Commission reform program director with Washington, D.C.-based Campaign Legal Center, one of the organizations to file the FEC complaint.

"Kelsey appears to have stacked legal violation on top of legal violation, and we anticipate that federal authorities will take this very seriously.”

Kelsey and the group of donors previously denied the allegations.

“This is a frivolous attack by Soros-funded liberal groups whose goal is to target effective conservative lawmakers," Kelsey said in a statement Wednesday afternoon.

George Soros, a wealthy businessman and fundraiser for Democrats, is not listed as a donor on the center's website. The Jennifer and Jonathan Allan Soros Foundation, an organization operated in part by George Soros' son, is one of nearly 70 institutions listed as a donor on the center's website.

The center has historically filed complaints against Democrats and Republicans. Center founder Trevor Potter is a Republican, appointed to the FEC by then-President George H.W. Bush before serving as general counsel to John McCain's 2000 and 2008 president campaigns.

► More: More Sen. Brian Kelsey campaign transactions hint at possible straw donor issues

A coincidence that 'would defy belief'

In addition to the donations from lawmakers and others, the complaint also highlights a money trail from Kelsey's state campaign through state and federal political action committees to a federal advocacy organization that purchased radios advertisements supporting Kelsey's campaign for Congress.

The committees include:

Citizens 4 Ethics in Government, a federal political action committee founded by controversial GOP donor Andy Miller;

The Standard Club PAC, an organization created by Josh Smith, the owner of a private Nashville dinner club frequented by Kelsey and other lawmakers, and;

The American Conservative Union, a national advocacy organization that helps Republicans.

The complaint says the suggestion the transactions between Kesley and the PACs were merely a coincidence “would defy belief.”

“The much simpler and more plausible inference is that Kelsey (or his agents) routed the funds to pay the ACU to pay for the advertising,” the complaint says.

“There is reason to believe that ACU did not merely have funds fortuitously drop into its lap from the very candidate for whom it was preparing to advertise.”

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

The complaint further alleges Kelsey, along with Casada, Sens. Steve Dickerson and Dolores Gresham, and Reps. Ron Gant and Martin Daniel, as well as a failed Republican legislative candidate, violated federal campaign finance laws, while even labeling the legislators straw donors.

Also mentioned in the complaint are Thomas A. "Thomsen" Smith, who helped raise money for Kelsey's congressional bid, and Troy Brewer, an oft-used treasurer for Republicans throughout Tennessee. Both are mentioned given their connections to the entities involved in the alleged money trail.

The complaint relies heavily on a USA TODAY NETWORK-Tennessee analysis, which outlined money moving from Kelsey's state campaign account to lawmakers who had also made personal contributions to his federal campaign.

A political consultant with knowledge of the Tennessee lawmaker’s transactions previously said Kelsey asked multiple state legislators to make a federal contribution in exchange for a donation to their own state campaigns.

All of the lawmakers named previously denied the allegations, with some calling them "ridiculous" and "erroneous."

Casada reiterated a recent statement where he called Kelsey a longtime friend and denied wrongdoing.

"It is not uncommon for allies to support each other in their political endeavors. Claims that we made some sort of illegal deal involving campaign donations is completely absurd," Casada said through a spokesman.

On Wednesday, Gresham said through a spokeswoman the allegations are "nonsense."

Daniel noted he made a personal donation to Kelsey in refuting the allegations.

"There was no arrangement made involving campaign donations, and I am proud to call him a friend and colleague," Daniel said through a spokesman.

Gant also said he and Kelsey are long-time friends and noted his contribution to Kelsey's congressional campaign came from a personal account.

What they're accused of and why it's wrong

There are five specification allegations contained in the report:

1. Straw donation violations

Federal law prohibits donors from making contributions in the name of another person. This practice, known as "straw donations," may provide candidates or committees money that exceeds the allowable limit.

Kelsey is accused of violating straw donor prohibitions by purportedly orchestrating the money trail from his state campaign account to the ACU. He may have also violated straw donor laws when he gave campaign contributions to lawmakers who provided donations to his federal campaign, according to the complaint.

The PACs and other state lawmakers may have also violated straw donor bans by their participation in the contributions, according to the complaint.

2. ACU's contributions constitute coordinated communications, exceed limits

When the ACU spent $80,000 on radio advertisements in support of Kelsey's failed congressional bid, the complaint alleges the purchases were likely made at the suggestion of Kelsey or an agent.

The complaint states the ACU's actions meet the definition of coordinated communications, which means the $80,000 would count as a contribution to Kelsey. That amount would far exceed the $2,700 federal contribution limit, according to the complaint.

3. Kelsey accepted donations in excess of federal limits

If the ACU's radio advertisement amounts to an $80,000 contribution, then the complaint states Kelsey accepted a donation that far exceeds federal limits.

4. Kelsey knowingly and willfully violated federal soft money prohibition

Those filing the complaint argue Kelsey violated a ban on soft money, which prohibits federal candidates from using state campaign donations in a federal election.

5. ACU failed to report contributions for independent expenditures

The complaint notes the various contributions from the Standard Club PAC and Citizens 4 Ethics in Government to the ACU that were made around the same time the ACU purchased ads for Kelsey.

Pointing to the ACU’s federal disclosure, the complaint argues the organization needs to report more information about the sources of funding that helped pay for the radio ads in support of Kelsey.

Who filed the complaint?

The complaint comes from Washington, D.C.-based nonprofits Campaign Legal Center and Democracy 21.

Last year, the organizations encouraged federal election officials to enforce campaign finance laws, arguing President Donald Trump and Hillary Clinton’s campaigns illegally coordinated with several super PACs.

Earlier this year, the Campaign Legal Center sued the U.S. Department of Justice in an effort to force the release of emails and correspondence between the agency and a pro-Trump super PAC.

What happens next?

The complaint calls for a Federal Election Commission investigation and levy penalties for any violations. The letter to the DOJ requests a formal investigation.

There's no guarantee any investigation occurs, or whether any possible probe confirms wrongdoing.

The FEC reviews all complaints filed on a case-by-case basis. All enforcement matters are confidential until they are resolved, according to the agency.

The complaint against Kelsey and other lawmakers is not the first time Tennessee politicians have faced federal scrutiny. In the past, the FEC has probed the finances of Sen. Jim Tracy and former lawmaker Joe Carr.

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