Complaint: Monarch Beverage improperly funneled campaign cash

A campaign finance battle involving Indiana's largest beer distributor could undermine a long-standing loophole that Indiana companies often use to skirt tough campaign contribution limits.

An election complaint against Monarch Beverage accuses the company of illegally funneling nearly $1.5 million in campaign cash through a little-known limited liability company called Vision Concepts.

The allegation comes from the Indiana Beverage Alliance, a group of smaller beer distributors that compete with Monarch. The complaint is now pending before the Indiana Election Commission.

Monarch and Vision Concepts say they've done nothing wrong. The companies — which have the same address and chief executive — have hired top-flight lawyers, including former Indiana Republican Party Chairman Murray Clark, to fight the accusation.

At issue is a state law that limits corporations like Monarch to giving $22,000 a year to state and local campaigns. Those limits are intended to prevent powerful companies with deep pockets from hijacking the election process.

But a wrinkle in the law allows certain kinds of businesses, including limited liability companies, to make unlimited donations. That exemption exists because Indiana didn't even have LLCs when the state's campaign finance laws were written.

Still, contributors in Indiana are prohibited from giving in the name of another — and that's what the Beverage Alliance says Monarch has done.

Vision Concepts has contributed at least $1.47 million to Indiana candidates and political committees since 2002, making it one of the state's biggest donors, according to the complaint. During that same time, Monarch alone would have been permitted to give just $264,000.

The complaint alleges that Monarch purchased promotional products from Vision Concepts at inflated prices so that Vision Concepts — a small company with just five full-time employees — could make unlimited contributions on behalf of Monarch.

A ruling against Monarch could open up a Pandora's box because many other corporations also have affiliated limited liability companies that give well above the corporate limits.

In fact, an Indianapolis Star review of campaign finance records found that several of Monarch's competitors — including members of the Beverage Alliance — have affiliated LLCs that have contributed more than would be allowed under the corporate caps.

And the practice extends beyond the beverage industry. Real estate companies, telecom giants, engineering firms and even the Indianapolis Motor Speedway have used LLCs to collectively contribute millions of dollars in excess of the corporate limits.

Many of those companies have a keen interest in legislation at the Statehouse or state contracts.

Monarch is no exception.

It regularly lobbies lawmakers on a variety of alcohol issues and has received economic development assistance from the state. In 2011, for example, Monarch was lobbying state lawmakers to get rid of a Prohibition-era law that prevents beer wholesalers from also distributing liquor.

That same year, Vision Concepts contributed more than $300,000 in campaign cash — well above the $22,000 cap to which Monarch would have been subject.

The Beverage Alliance, which has opposed Monarch's efforts to distribute liquor, says there's no way Vision Concepts — a small company that sells promotional items such as T-shirts and pens — could have contributed so much money on its own.

"I believe there is little evidence to support the idea Vision Concepts is a wildly successful promotional items company that is so interested in Indiana public policy that it has contributed nearly $1.5 million since 2002," Beverage Alliance President Marc Carmichael wrote in the complaint. "I believe the evidence will show that Monarch Beverage Inc., (wildly successful and very interested in Indiana alcohol public policy) has been making unlimited campaign contributions in the name of Vision Concepts LLC."

In an interview with The Indianapolis Star, Monarch and Vision Concepts CEO Phil Terry denied that allegation. He acknowledged that Monarch is Vision Concepts' largest customer, but said Monarch buys items at the same price as hundreds of other Vision Concept customers.

And Vision Concepts does have a stake in alcohol policy, he said.

"Vision Concepts' business is selling promotional items and services primarily to the alcoholic beverage industry," he said. "Vision and Monarch have similar interests in advancing good alcohol policy. Because of that common interest, we believe it's appropriate for both to make political contributions and engage in the political process."

Terry declined a request from The Star to provide financial statements showing that Vision Concepts earned the kind of profits that would make its large political contributions possible.

But he said the company brings in $800,000 to $3.1 million in annual sales.

Still, those figures could raise questions for election officials because the company is giving as much as $300,000 in campaign contributions a year.

"You're talking about a large amount of sales going to contributions, which is very unsual," said Larry Noble, a former general counsel to the Federal Election Commission who is now with the Campaign Legal Center in Washington, D.C.

States vary in how they treat corporate and LLC contributions, but anytime there are contribution limits, someone will try to find a way around them, he said.

"That's why you have rules against giving in the name of another," he said. "When you find a case where there seems to be a problem, you can start asking questons about the source of the funds."

Indiana election officials said the complaint against Monarch represents the first time a corporation has been acused of funneling money through an LLC to avoid the corporate limits.

"If a person or corporation — or really any entity — gave specifically to another entity so they could make that donation, that could run afoul of giving in the name of another person," said Trent Deckard, co-director of the Indiana Election Division.

Enforcing that law, however, can be challenging.

"We aren't necessarily staffed or given the mission of following LLCs and figuring out how they got their money," he said.

Ultimately, the state election commission will have to decide whether the Beverage Alliance has presented enough evidence to warrant a deeper probe.

Call Star reporter Tony Cook at (317) 444-6081. Follow him on Twitter: @indystartony.

Corporate contribution limits

Indiana law sets caps on the amount of money that a corporation or labor organization can contribute to political campaigns each year. Here are the limits, which total $22,000:

$5,000 among all statewide candidates

$5,000 among all state political party central committees

$2,000 among all candidates for state Senate

$2,000 among all candidates for state House of Representatives

$2,000 among all state senate legislative caucuses

$2,000 among all state House legislative caucuses

$2,000 among all candidates for county, local and school board offices

$2,000 among all political party committees other than state central committee

Source: Indiana Election Division of the Secretary of State's Office