Outside the Beltway

Does Herman Cain Also Have A Campaign Finance Problem?

Another potential problem for the Cain campaign.

Doug Mataconis · Monday, October 31, 2011 · 9 comments

On top of the story that Politico broke last night, the Milwaukee Journal-Sentinal is out today with what could be a violation of campaign finance laws in the form of in-kind contributions from a private company:

Herman Cain’s two top campaign aides ran a private Wisconsin-based corporation that helped the GOP presidential candidate get his fledgling campaign off the ground by originally footing the bill for tens of thousands of dollars in expenses for such items as iPads, chartered flights and travel to Iowa and Las Vegas – something that might breach federal tax and campaign law, according to sources and documents.

Internal financial records obtained by No Quarter show that Prosperity USA said it was owed about $40,000 by the Cain campaign for a variety of items in February and March. Cain began taking donations for his presidential bid on Jan. 1.

Prosperity USA was owned and run by Wisconsin political operatives Mark Block and Linda Hansen, Cain’s current chief of staff and deputy chief of staff, respectively.

The authenticity of the records was verified by two individuals close to the firm.

It is not known if Cain’s election fund eventually paid back Prosperity USA, which now appears defunct. The candidate’s federal election filings make no mention of the debt, and the figures in the documents don’t match payments made by the candidate’s campaign.

In addition to picking up these expenses at least initially, Prosperity USA also paid as much as $100,000 to the Congress of Racial Equality, a conservative black organization, shortly before Cain was a featured speaker at the group’s annual Martin Luther King Jr. dinner in mid-January.

Cain, who has surged to a top-tier presidential candidate in the past month, apparently was not paid for the appearance. The personal financial disclosure forms for the former CEO of Godfather’s Pizza list no honorariums for speeches.

Election law experts say the transactions raise a host of questions for the private organization, which billed itself as a tax-exempt nonprofit, and the Cain team.

“If the records accurately reflect what occurred, this is way out of bounds,” said a Washington, D.C.-based election lawyer who advises many Republican candidates and conservative groups on campaign issues. The lawyer asked not to be identified because of those affiliations.

Michael Maistelman, a Wisconsin campaign attorney, agreed.

“The number of questionable and possibly illegal transactions conducted on behalf of Herman Cain is staggering,” said Maistelman, a Democrat who has represented politicians from both parties on campaign issues.

Block and Hansen have not returned numerous calls in recent days.

There are potentially two problems here. One involves the FEC regulatory and legal violations inherent in receiving this kind of in-kind contribution from a corporation of any kind. Even after Citizens United, it is not legal for a corporation to simply give tens of thousands of dollars to a political candidate, or to make an in-kind contribution of the kind that this entity apparently did. The second legal problem is between the IRS and Block/Hansen. Since Prosperty USA is a non-profit tax exempt entity, the tax code forbids it from making any contributions of any kind, in any amount, to a political campaign. It’s also worth noting that Block, now known as The Cigarette Smoking Man on YouTube, has a history of doing things like this:

According to a report by The Associated Press, Herman Cain’s chief of staff Mark Block — the man America came to know from his appearance smoking a cigarette in the presidential candidate’s viral Web ad — has a troubled past that includes arrests for drunken driving and a suspension from campaigning in Wisconsin after accusations of breaking election rules.

In 1997, Block was accused of coordinating campaign activities between a state supreme court justice’s reelection campaign and a special-interest group that promoted school vouchers, in violation of campaign laws. Four years later, Block agreed to a settlement that included a $15,000 fine and a 3-year suspension from running campaigns in the state, but did not require him to admit guilt.

Ed Morrissey suggests that this mess, which is exactly what this is, can be attributed mostly to the inexperience on the part of Team Cain when it comes to things like this. Perhaps that’s true, although I’ve got to say that Block’s involvement in all of this does raise an eyebrow at the very least, but that just adds yet another piece of evidence to the question of how seriously Cain has been viewing this campaign. When you’re running for a Federal office, whether it’s Congress, the Senate, or the Presidency, the most important people you need to hire are a campaign manager, a communications director, and an attorney well-versed in campaign finance laws. If you think you’re going to learn something that complicated on the fly, you’re going to end up making mistakes even if there’s no nefarious intent involved.

Will anything come from this? It’s hard to tell. The Federal Election Commission won’t get involved typically unless a complaint is filed alleging a violation of a law or regulation. Even then, unless it’s a serious violation on the level of what John Edwards is alleged to have done, the typical result of an investigation is either a determination of no wrongdoing, or a fine. The IRS is a different story, of course, but that really depends on what Prosperity USA’s tax returns say and could take years to develop. This story isn’t nearly as sexy as the Politico story, so it’s unlikely to get the same amount of coverage. In terms of the law, however, it strikes me as being far more serious.