Rory Reid’s gubernatorial campaign circumvented contribution limits, created 91 shell PACs to infuse $750,000 into campaign

Campaign contributions KSNV coverage of questions raised about campaign contributions to Rory Reid's failed gubernatorial campaign, March 4, 2011.

In one of the most brazen schemes in Nevada history, gubernatorial candidate Rory Reid’s campaign formed 91 shell political action committees that were used to funnel three quarters of a million dollars into his campaign, circumventing contribution limits and violating at least the spirit – and maybe the letter – of the laws governing elections.

Reid, who was fully aware of what was done, essentially received more than $750,000 from one PAC – 75 times the legal limit -- after his team created dozens of smaller PACS that had no other purpose other than to serve as conduits from a larger entity that the candidate funded by asking large donors for money. Indeed, the shell PACs were formed in the fall and dissolved on Dec. 31, after they had served their short-term function, which was to help the candidate evade campaign contribution laws.

Reid solicited donations for the Economic Leadership PAC, which raised more than $800,000 over a five-month period – donations that were then disbursed in $10,000 increments to dozens of other PACS, which quickly funneled the money back to the candidate’s campaign account.

Records show many of the PACS had names implying rural provenance –such as the Douglas County Committee for Change and Lyon County Leadership Fund – but they all had the same Las Vegas residential address before being quietly dissolved after the election. The money laundered through these PACS often resided there only for a couple of days, a transaction that was needed to, they believed, comply with contribution limits on a technicality. The Reid campaign could then quickly make use of the money in a futile attempt to salvage his faltering gubernatorial bid.

Reid told me today that he cleared what he did with his legal counsel – Paul Larsen – and the secretary of state’s office. “What we did was fully disclosed and complied with the law,” Reid said. “We did it because it was legal. If it’s a statement on anything, it’s a statement on the failure of campaign laws. This was not done in the dark of night. We disclosed everything we did.”

Indeed. But those PACS were named in such a way as to disguise why they were created and there is no other way to see this than a maneuver to get around the campaign contribution limits. “Just because you’ve never seen it before doesn’t mean it’s wrong or illegal,” Reid said. “It’s just a different structure.”

I contacted Secretary of State Ross Miller, who could not confirm that the Reid campaign cleared the machinations with his office. In fact, he checked with his elections folks, who had no recollection of any such conversations. I have not been able to reach Larsen.

“I don’t have all the facts yet,” said Miller, who promised to look into the matter. “But I will not hesitate to contact the election integrity task force and the attorney general if it rises to that level.”

So will it?

The campaign finance laws are a Swiss cheese amalgamation of statutes designed to allow all manner of nonsense. But there are laws that prohibit giving contributions in the name of others and if Miller investigates, the campaign folks will have to prove that the transactions were not just on paper to those smaller PACs.

The scheme worked this way, according to records:

On Aug. 23, 2010, two Reid operatives amended the registration for the Economic Leadership PAC, an existing entity, to convert it to one with his campaign headquarters as the address and his campaign manager, David Cohen, and another staffer, Joanna Paul, as the officers.

The ostensible purpose, required on the registration papers: “To support candidates and organizations that promote economic development and diversification”

But that was a ruse. That clearly was not the entity’s real purpose, as subsequent events would show, and appears to be an attempt to disguise why it was formed.

Reid had already begun soliciting money for the PAC, mostly from major donors who gave large checks to what he told them was an effort to assist his campaign.

Among the donors were major unions, gaming companies and wealthy donors, some of whom already had given to his campaign committee. Here is the link to the report:

Economic Leadership PAC

(Full disclosure: Among those induced to contribute to the PAC were Jim Rogers, through the TV stations on which my program appears, and Janie Greenspun Gale, part of the family that owns the Las Vegas Sun.)

Shortly after Team Reid formed this PAC and the candidate began soliciting funds for it, a series of other committees began to sprout, all with the same address – Joanna Paul’s home address. They were set up with Larsen as the resident agent and Paul as the treasurer.

Larsen put only “all legal purposes” on the registration forms for the entities to explain why they were formed, a perhaps barely sufficient, purposely vague statement to fulfill a statutory requirement to state a “purpose for which it was organized.”

During the next two months, the Economic Leadership PAC transferred, in $10,000 or $9,980 increments – virtually all of its money to those other committees supposedly headquartered at Paul’s home. In all, 91 PACs were formed, although only 76 were used as conduits – the others did not file campaign contribution reports with the state, indicating they had zero activity.

More than $750,000 flowed into Reid’s campaign after only brief stops in the smaller PACS, which allowed the Economic Leadership PAC to flout limits that restrict PAC contributions to $10,000 per election. Reid’s campaign thus received 75 times the amount permitted by law because of the system his team erected to get around the law.

Here’s how it worked:

On Sept. 7, 2010, 30 of these smaller PACS received $10,000 each from the umbrella PAC. Two days later, they all transferred the $10,000 checks to Rory Reid’s campaign, a good way to get $300,000 in one day.

For the next few weeks, many similar transactions occurred. On Sept. 23, four PACS received contributions from the Economic Leadership PAC; two days later, they funneled the money to the Reid campaign. On Oct. 5, 10 PACS get money; two days later, they contribute to Reid. On Oct. 11, 27 PACS got money; two days later, it was transferred to Reid’s account.

And so it went – you see the pattern.

So Reid essentially solicited money for a PAC, but he knew the money would ultimately end up in his campaign bank account.

There’s much more to come in this story – tune in to “Face to Face” tonight as Reid has agreed to appear, read my column Sunday in the Las Vegas Sun and keep your eye on this blog as I will begin to post documents and more to show exactly what happened.