lawmaker collage

More than a third of Michigan lawmakers are connected to nonprofits or 527 administrative accounts that can accept corporate cash, according to an investigation by MLive and the Michigan Campaign Finance Network.

(Emily Rose Bennett | MLive.com)

By Emily Lawler and Craig Mauger

LANSING, MI -- Exactly 100 days after the state Senate signed off on millions of dollars in tax breaks for data centers, the company seeking the change gave $10,000 to an account that helps pay Senate Majority Leader Arlan Meekhof's expenses.

It is illegal for a corporation to give directly to a candidate's campaign account in Michigan. But the $10,000 contribution from Switch, a Nevada-based company planning to open a data center in West Michigan, falls into a difficult-to-trace and rarely discussed form of legal fundraising where many donations don't have to be disclosed.

A joint investigation by MLive and the Michigan Campaign Finance Network found at least 50 of Michigan's 144 House and Senate members, about one in three, are connected or have been connected to a nonprofit or administrative account. From 2013 to 2015, about $12.8 million flowed to more than 100 accounts connected to political parties, elected officeholders and their consultants in Michigan, the investigation found.

"What it means is Michigan legislators potentially can be bought and sold," said Jane Briggs-Bunting, president of the Michigan Coalition for Open Government.

Sen. Patrick Colbeck, R-Canton, is connected to the Fixing Michigan administrative account. He uses it to fund a Memorial Day service in the state Senate chambers, he said. Pictured is the 2016 Memorial Day service on Thursday, May 26, 2016.

Finding who runs these lawmaker-connected organizations, who gives to them and what the donations are used for can be extremely difficult. MLive and MCFN examined hundreds of public filings with the IRS and self-disclosures on political giving made available by companies, as well as contacted fund administrators to determine their connections to state lawmakers.

Our investigation found that the majority of funds connected to sitting lawmakers have taken money from special interest groups or corporations -- including groups who are advocating for specific legislation -- while providing little information about where donations come from.

The money from Switch went to the Meekhof Administrative Account, known as a 527 account, which covers office-related expenses, such as travel or conference fees. Meekhof, R-West Olive, declined to comment on the donation.

Switch released a statement saying: "We proudly and enthusiastically support Republican and Democrat elected leaders who support our efforts to bring the significant investment, jobs and technology benefits of our world-class data center ecosystems to their states."

The Meekhof Administrative Account raised more than $25,000, a threshold that requires these types of accounts to report donors and expenditures to the Internal Revenue Service. But many lawmakers who benefit from smaller 527 accounts or nonprofits do not have to disclose donations.

These types of accounts have been available for use for decades, but prior to the 1990s, elected officials were able to use Officeholder Expense Accounts and could take in corporate money. The accounts paid for items varying from office remodels to football tickets. Dan Gustafson, a former Republican lawmaker who fought to eliminate the accounts, said they were eliminated because of a growing sense the accounts were getting out of control. His bill to eliminate them was signed in 1994, and he said a few years later nonprofits started cropping up to accept corporate cash.

Nonprofits and 527 accounts are legal because they don't directly fund campaign work, but without state or many federal regulations, they maintain an air of secrecy.

Search by lawmaker to find connected funds, then click "donors" to see traceable donations to that fund from 2013-2015. Or, search by donor to see which lawmaker-connected funds they have given to.

Reading the story on our app? Click here to see the database.



What these funds are

The accounts are similar to Gov. Rick Snyder's so-called NERD Fund, which made headlines in 2013 for using anonymous donations to pay one of his top advisers. The funds are either nonprofits, typically 501(c)(4) social welfare organizations, or administrative accounts, known as 527s for the portion of the IRS Code that covers them.

Elected state officials traditionally raise money for their campaigns through candidate committees and through optional political action committees known as PACs.

The Michigan Secretary of State tracks both of these forms of fundraising and requires disclosure of both donations and spending. In Michigan, like at the federal level, corporations cannot give directly to either of these types of accounts.

But nonprofits and 527 administrative accounts are a different story.

Nonprofits -- which can be used for things such as charitable giving and community events -- don't have to disclose donors to the IRS. And they have to file a form with broad details about their spending only if they raise more than $50,000 a year, according information on the IRS website.

Administrative 527 accounts can raise money to pay for expenses related to holding office, like the cost of traveling to a meeting, staying at a hotel for a conference or even sending Christmas cards to constituents. They generally only have to report donations and expenditures if they raise more than $25,000 a year, according to the IRS website.

Both types of groups can take money from individuals, corporations and lobbyists.

In Michigan and 21 other states, according to data from the National Conference of State Legislatures, direct corporate contributions to candidates' campaign are illegal.

"In Michigan if (corporations) want to support a candidate they have to find kind of outside means to do so, such as giving to independent PACs or these 527s and nonprofits," said Denise Roth Barber, managing director of the National Institute on Money in State Politics.

In 2015, tobacco giant Reynolds American Inc. disclosed that it gave $2,500 to the Mid Michigan Future Fund, a nonprofit tied to Sen. Rick Jones, R-Grand Ledge.

Reynolds American also gave $10,000 to the Great Lakes Administrative Account, a 527 connected to then-Senate Majority Leader Randy Richardville, R-Monroe, in 2014. Each lawmaker pushed a pro-tobacco industry bill on e-cigarettes in 2014. Reynolds American voluntarily discloses its donations on its website, but did not return a request for comment on this article.

Sen. Rick Jones (right) presents a check from the Mid Michigan Future Fund to Rev. Bill Amundsen, treasurer of The Michigan Council on Alcohol Problems, in 2012. The Mid Michigan Future Fund is a nonprofit that has taken corporate donations.

Both Jones and Richardville say the donations were unrelated to legislation.

"They're never connected. I know that people would be skeptical of that. However, the people that were in charge of raising funds were not in charge of legislation," said Richardville, who was term-limited out of the Senate in 2014 and now owns a business consulting firm and serves as a district chair for Republican presidential nominee Donald Trump. "Those two things were kept separate."

Jones, who said he has been a longtime supporter of e-cigarettes, said while the Mid Michigan Future Fund is connected to him -- and he can give suggestions on spending -- an independent board chooses how to spend donations.

"If there's some sort of accusation that some sort of donations are influencing me on e-cigarettes that's certainly not accurate," Jones said. "I have always been very supportive of the electronic cigarette, and many of my friends have stopped using tobacco because of these e-cigarettes."

Not permitted in Congress

Michigan does not have its own disclosure requirements for nonprofits or 527 accounts that aren't doing direct campaign work. While some funds alert the state Department of Licensing and Regulatory Affairs to their existence, there is no clear requirement from the state on which accounts have to do so.

Secretary of State Ruth Johnson, whose office is tasked with enforcing campaign finance law and compliance, has a 527 account called the Johnson Administrative Account -- which publicly discloses donors on her campaign website. She declined to be interviewed for this story through a spokesperson, who said regulations surrounding nonprofit organizations and 527 are a federal matter.

For years Johnson has supported requiring quarterly reports for politically-connected nonprofits, and spokesperson Fred Woodhams said she still does.

"The secretary continues to support greater disclosure. That's why she voluntarily discloses her contributions and expenditures to her administrative account," Woodhams said when asked about her account.

Larry Noble, a national expert on campaign finance law, and general counsel for the Campaign Legal Center in Washington D.C. questions if Michigan has a "reporting gap" in its law. He said many other states require disclosures for these types of accounts, and at the federal level, members of Congress are barred from maintaining these types of accounts to pay for their office-related expenses.

"In most states, probably, what would happen is that the activity that they're doing would probably force them into political committees," Noble said.

But in Michigan the accounts are both legal and prevalent, even if very few lawmakers want to talk about them. MLive surveyed all 144 Michigan lawmakers asking whether they were connected to a nonprofit or administrative fund, and just seven responded -- all of whom said they were not connected to these types of funds.

One of those seven lawmakers, Democratic Rep. Jeff Irwin or Ann Arbor, referred to the accounts as "undisclosed slush funds."

"For me, it just didn't smell right," said Irwin when asked why he did not have one of these accounts. "If candidates are not allowed to take corporate checks, just because there's a technically legal path to bring those corporate checks into the political arena, doesn't mean that it's the right thing to do."

The few lawmakers who would discuss these accounts said they use them to offset the high cost of being a state officeholder and do good things for their communities.

Rep. Jeff Farrington, R-Utica, has a 527 account called Eleven Million Strong, which he said helps defray the costs of the many outings lawmakers are expected to attend. Others, such as Ken Yonker, R-Caledonia, said the nonprofits help with charitable causes in their districts. He said his fund, Yonker Community Engagement Fund, helped build a splash pad in his district and add lighting to a county fairground.

"I think it's a great opportunity as a public servant to be able to raise money that way and be able to help projects within our district," Yonker said.

Meekhof is connected to both a nonprofit, the West Michigan Community Preservation Fund, and a 527 administrative account, the Meekhof Administrative Account.

The administrative account brings in enough money it has to disclose both donors and expenditures to the IRS. The nonprofit West Michigan Community Preservation Fund doesn't have to disclose specific donors but public records available through the IRS show it raised $273,350 between 2013-2015.

The nonprofit fund, which was directed in 2014 by Bob DeVries, Ellen Kletzka, Steve Linder and Penny Blair, according to the most recent IRS documents -- declined to voluntarily disclose donors to for this investigation. Linder and Kletzka work for the Sterling Corporation, a Republican communications firm; while Blair works in constituent relations for the Senate and DeVries serves as Meekhof's chief of staff .

In two years, the Meekhof Administrative has reimbursed Meekhof $80,315 for meals, travel, telephone costs and parking, according to filings which are publicly available on the IRS website.

"I do attend some conferences that are helpful in leadership things. I plan to continue to do those things because the public asks me to make good decisions," Meekhof said. "I want to be able to see all the best stuff that's out there right now and how problems are being solved."

Michigan attorney Richard McLellan has been setting up these types of nonprofit groups in Michigan for decades and said they are widely used.

"The key to those is compliance. Organize them under the IRS, file the tax returns, do not disclose the donors. There's no requirement," McLelland said. "Hillary Clinton has them, Rick Snyder has them, everybody does it."

Accounts difficult to trace

No official list of 527 accounts and nonprofit organizations connected to state lawmakers exists. Even with IRS filings, and other sources, many mystery organizations remain in Michigan that receive donations from companies who describe them as political accounts in corporate disclosures.

Corporations reported making political contributions to the Michigan Enterprise Fund, Keep Michigan Growing and Advancing West Michigan -- but no information on who runs any of these accounts could be found as part of this investigation.

In some cases, connections are obvious: a 527 connected to State Rep. Andy Schor, D-Lansing, is called the Schor Lansing fund, for example.

Others use more generic names, which McLellan said he advises his clients to do, but a family member or staff member are listed on account paperwork.

"I would always argue to a legislator do what you can do, do a good job, but you have a very generic name," McLellan said.

Republican state Rep. Al Pscholka's wife, Sue, and his legislative staffer, Adam Carlson, are officers for the West Michigan Liberty Fund; while Rep. Mike Callton, R-Nashville and his wife, Shelly, are both on the board of the Taking Care of Business Fund.

The representatives connected to these funds, except for Schor, did not return messages seeking comment on the funds. In a letter sent to MCFN for this investigation Schor said his 527 account primarily "fulfills requests for financial requests (such as ads, sponsorships,etc.) to local charities and other non-electoral entities."

Matt Golden, director of member services for House Speaker Kevin Cotter, R-Mt. Pleasant, is listed as the custodian of records for five 527 accounts in IRS paperwork. He said at least one group, Vision for Michigan, benefited Cotter, but declined to disclose what the other groups did, saying only that money, sometimes from corporations, went toward "a variety of legal purposes." Vision for Michigan has not reported any donor or expenditures with the IRS.

Michigan Deserves Better, a Super PAC that supports the state's auto no-fault law, has given about $150,000 to nonprofit and 527 accounts. In 2015, it gave $20,000 to the Right Turn Project, a nonprofit connected to Rep. Brian Banks, D-Detroit, a member of the House Insurance Committee.

"We try to work with candidates and legislators that are receptive to our issue," said Margaret Browning, the treasurer for Michigan Deserves Better, when asked about the contribution. She added that Banks "has been very involved in our issue."

Banks didn't respond to requests for comment on his nonprofit's fundraising. However, according to advertisements posted online, his nonprofit helped put on a gospel concert to raise awareness about mental illness in March 2015 and an education and employment fair in October 2015.

Rep. Henry Yanez, D-Sterling Heights, doesn't have a nonprofit but is considering starting one. Quite often, he said, lobbyists in Lansing have asked if he has a "nonprofit vehicle" they can donate to.

Having a nonprofit, he said, would allow him to raise money to do positive things for his district, like purchase backpacks for students and turkeys for needy families during the holidays. While Yanez has concerns about interest groups giving to the funds, he believes the good from the money could outweigh that.

If he did start one he said he would disclose its donors, but argued that constituents' concerns about the accounts might come down to the level of trust they have in their individual representatives.

"I have grave concerns about what's known as dark money in the system," he said. "It's unfortunate that that's what the rules are."

And the same dark money Yanez mentions is what worries Briggs-Bunting about the current system.

"Citizens have a right, and a need, to know who is influencing or at least attempting to buy influence for their legislators," Briggs-Bunting said. "And we don't know. It's a blank slate right now."

Craig Mauger is the executive director of the Michigan Campaign Finance Network, a nonpartisan not-for-profit organization that focuses on the impact of money in Michigan politics. Mauger previously covered state politics as a reporter for Michigan Information & Research Service (MIRS News).