Gov. John Carney appointees accused of unethical campaign activity

Scott Goss | The News Journal

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Two of Gov. John Carney's appointees are coming under fire for using a series of political action committees to successfully help unseat a Democratic state legislator.

Senate Minority Whip Greg Lavelle, R-Sharpley, on Friday asked the Delaware Public Integrity Commission to investigate whether State Escheator Brenda Mayrack and Mike Houghton – chair of the Delaware Economic and Finance Advisory Council – created an appearance of impropriety by working in tandem to foil the re-election campaign of Rep. Charles Potter, a Wilmington Democrat who lost his seat in last month's primary.

Mayrack and Houghton are ostensibly on opposing sides of the state's unclaimed property regime, a huge source of revenue for Delaware. Mayrack's job is to require corporations to pay their fair share while Houghton – a partner at the Wilmington law firm Morris Nichols Arsht & Tunnell – represents the companies being forced to turn over that money.

Yet the two worked together to move thousands of dollars through a trio of PACs before ultimately being spent on campaign ads aimed at ousting a three-term state legislator, according to Lavelle.

The state senator argues the coordinated political activity between the Carney appointees could be seen as a special relationship that might bleed over into decisions Mayrack will make regarding money owed by Houghton's clients.

"The concern is clear," Lavelle told The News Journal. "Given Mr. Houghton's legal practice and the authority that Ms. Mayrack has over unclaimed property, there is an appearance – if not a real – conflict of interest."

Lavelle's complaint targets only Mayrack because Houghton's position as head of DEFAC – a panel of state officials and economists that forecast the state's financial outlook – falls outside the purview of the commission, which oversees ethics rules for the state's executive branch.

Mayrack on Friday said she had not seen Lavelle's complaint and declined to comment further. Houghton in an email said he is "surprised and personally disappointed" by Lavelle's complaint.

"I have had a cordial and collegial working relationship on policy issues with Sen. Lavelle in the past," wrote Houghton, a past president of the Delaware Bar Association. "I regret Sen. Lavelle's decision to attack me and others, and I strongly disagree with his inferences and conclusions."

Campaign finance reports do support Lavelle's assertion that Houghton donated money to PACs controlled by Mayrack – funds ultimately used to produce advertising supportive of Potter's primary opponent, Wilmington City Councilman Nnamdi Chukwuocha.

Mayrack, a former Delaware Democratic Party executive director and state auditor candidate, is listed on official documents as the lead contact for First State Forward PAC and Lincoln's PAC, while she's identified as the treasurer for Busy Individuals Make Better Organizers.

The women were the first donors to all three PACs, having staked each of them with $600 immediately after their creation in July 2017. Each of those PACs then lay dormant until just weeks before the 2018 primary.

That's when Lincoln's PAC collected a combined $5,400 from at least five donors, including a $3,500 contribution from Houghton. Busy Individuals raised another $2,225, more than half of which came from Houghton.

About two weeks before the primary, Lincoln's PAC and Busy Individuals PAC then transferred roughly $7,000 to First State Forward, which used the money to purchase about $4,200 worth of print and social media advertising aimed at drumming up support for Chukwuocha.

Potter, who has repeatedly clashed with city officials, lost the race after receiving less than 41 percent of the vote. Chukwuocha is not facing an opponent in the general election.

Neither Chukwuocha nor Potter returned phone messages seeking comment.

"Wouldn't the public be concerned if [Delaware Department of Transportation Secretary] Jennifer Cohan were running a PAC and getting contributions from highway contractors," Lavelle asked. "I'm all for the First Amendment, but when you get to that level, you have to give up something."

Mayrack's position in state government might be little known by the public, but it is vitally important to the state's revenue.

Unclaimed property typically includes inactive checking or savings accounts, uncashed payroll checks, stock certificates and gift card balances. After three to five years, companies unable to locate the rightful owners are required to turn that property over to the state, a process called "escheat." The state then continues trying to locate the owner while collecting interest on the mass holding.

Since Delaware is the corporate home of most companies, it gets an unusually large amount from escheat – typically more than $500 million a year. The interest from that pot of gold is the state's third-largest source of revenue.

Escheat payments are routinely challenged by various corporations, some of which are represented by Houghton. Mayrack's job is to ensure those companies meet their requirements under the law.

"Ms. Mayrack's involvement in partisan political money funneling activities in coordination with her former law firm colleague Mr. Houghton is believed to constitute conduct that would cause suspicion as to the integrity and independence of her decision-making," Lavelle wrote in his complaint. "The influence that Mr. Houghton would have based upon his joint political 'money bundling' efforts with Ms. Mayrack raises the specter of undue influence that constitutes an appearance of impropriety."

Lavelle's complaint is somewhat unusual in that it comes from a high-ranking Republican and accuses two prominent Democrats of working to defeat another Democrat.

It also comes just days after the Delaware Democratic Party filed a complaint with the Delaware Elections Department accusing Lavelle and state Treasurer Ken Simpler of illegally coordinating with PACs supporting their respective campaigns – a charge the state senator has vehemently denied.

"This is activity that cannot be allowed to occur and has nothing to do with defending the honor of Charles Potter," Lavelle said. "It also has nothing to do with retribution. I was doing the research on this prior to the [Democrats'] complaint being filed."

This is not the first time campaign spending in the Representative District 1 primary contest has sparked controversy.

The Delaware Democratic Party last month took issue with a $500 contribution Potter's campaign received from state Sen. Colin Bonini, a Dover Republican who ran against Carney for the governor's seat in 2016.

Party officials questioned why a Democratic legislator from Wilmington would accept a donation from a Republican "whose voting record indicates he is not a friend of the city."

Bonini claimed he simply gave money to a friend. Potter never responded to questions about the contribution.

The Delaware Public Integrity Commission is expected to consider Lavelle's request for an investigation into his complaint at its Nov. 20 meeting. If the commission moves forward and ultimately finds wrongdoing, it could recommend she be given a written reprimand or removed from her job.

Officials with the state Finance Department, which employs Mayrack, and the Governor's Office declined to comment.

Contact reporter Scott Goss at (302) 324-2281, sgoss@delawareonline.com or on Twitter @ScottGossDel.