Michigan Dems hit with $500,000 fine for bingo games

Jonathan Oosting | Detroit News Lansing Bureau

Lansing — The Michigan Democratic Party has agreed to pay a hefty $500,000 fine after the Federal Election Commission concluded the party under-reported cash contributions at past bingo fundraisers by $4.4 million and violated campaign finance laws.

The party inaccurately reported approximately 12,500 contributions from the game-of-chance fundraisers, which it had operated over nearly 14 years but shut down three years ago, according to a conciliation agreement with the federal oversight agency.

The civil fine is among the largest ever levied by the FEC. Records show the agency has levied civil penalties of $500,000 or more 10 times since 1980.

The FEC first inquired about bingo parties in early 2014, said former Michigan Democratic Party Chairman Lon Johnson, who launched an internal investigation that was submitted to the FEC, initiating a federal probe.

“In the investigation of that inquiry, we discovered the bingo operation was not in compliance,” Johnson told The Detroit News. “We shut it down immediately. We investigated and turned over what we found.”

The bingo operation predated his time as chairman, Johnson added. The FEC completed its own factual and legal analysis in August 2016.

Former Michigan Democratic Party Chairman Mark Brewer, who ran the party from 1995 to 2013, issued a 13-page statement Friday morning blasting Johnson’s initial internal investigation as a “shoddy” probe that was “hardly more than an inquisition full of fiction.”

Brewer argued that he and other party staff were “denied due process and have been defamed.” He said he was willing to explain the bingo operation but was instead subjected to “hostile interrogations” by party attorneys during a meeting that included Johnson.

Johnson denied any intent to sully Brewer’s reputation.

“The FEC did their own investigation,” he said. “They also found problems which led to the subsequent fine. Any other characterization is just not true.”

The FEC concluded the party accepted anonymous cash contributions, reported false contributions and refunds, understated total contributions and disbursements, failed to keep proper records and more.

The Michigan Democratic Party agreed to pay a $500,000 fine, including $100,000 within the effective date of the agreement it reached with the FEC. The party must also amend past disclosure reports, identify a treasurer to handle compliance and retain an independent accounting form to conduct a review.

The agreement between the FEC and Michigan Democratic Party notes that current Chairman Brandon Dillon contends he had no knowledge of the bingo fundraising practices, which ended before his term began.

“We take our reporting requirements very seriously, and we promptly stopped all bingo fundraising activity over three years ago,” Dillon said in a statement.

“As our agreement with the FEC states, the previous party leadership voluntarily brought this issue to the FEC’s attention, and we have cooperated fully with the Commission at each step of this process. We have taken every step to ensure what happened in the past doesn’t happen again and will continue the important work of helping to elect Democratic candidates who will fight on behalf of every resident of our state.”

Johnson served as party chairman from February 2013 through July 2015, when he stepped down for an unsuccessful run for Congress. Dillon took over in July 2015.

Republicans were quick to jump on the fines, questioning whether money Democrats raised at the bingo events was used to support federal candidates like U.S. Sen. Debbie Stabenow of Lansing, who is up for re-election next year. GOP candidate Lena Epstein of Bloomfield Hills called on Stabenow to immediately donate $500,000 to charity, matching the amount of the FEC fine.

“I think it is an example of this party being in complete and total disarray,” said Michigan Republican Party spokeswoman Sarah Anderson.

Anderson also noted that Brewer had served as legal counsel for Democratic gubernatorial candidate Gretchen Whitmer when she launched her campaign. The campaign has more recently retained Perkins Coie LLP, a national firm that has represented various Democratic groups, including the Democratic Governors Association.

Bingo games had been a major source of income for the Democratic Party in the 1990s and 2000s, but Michigan Republicans and their allies had repeatedly attempted to shut them down. A 1994 law would have precluded political organizations from fundraising off bingo games, but voters overturned the law through a 1996 referendum supported by the Democratic Party.

The Michigan Democratic Party issued prize vouchers to anyone who won over $60 in prizes and relied on those vouchers to calculate its total disbursements, according to a summary of relevant facts in the FEC agreement. It did not report amounts below $60, and the party failed to report cash amounts paid directly to bingo staff or deposited into a progressive jackpot account.

Brewer, who now works as a private-practice attorney for the Goodman Acker law firm in Southfield, did not immediately return calls from The Detroit News on Friday but released a lengthy statement dated June 5 and organized like a legal document.

He said a 1981 advisory opinion from the FEC to the Muskegon County Republican Party, which had run its own cash bingo games, indicated the commission did not require the party to record the names and addresses of individuals contributing less than $50 at a single event.

The Michigan Democratic Party was not the first to raise small-donor funds for its federal account at cash bingo games “and merely followed the same record-keeping and reporting requirements followed by Michigan Republicans,” he wrote.

Similarly, Brewer said reporting prize payouts less than $50 was both impractical and would not have served the FEC’s disclosure goal of educating voters, deterring corruption and gathering data to detect violations of contribution limits.

“At high-volume, fast-moving cash events like these, it is simply impossible to collect the names, addresses and prize amounts on that scale, and no useful purpose is served thereby,” he wrote.

joosting@detroitnews.com