Report: American Conservative Union scrutinized as part of Kelsey campaign finance probe

A federal probe into campaign finance dealings by state Sen. Brian Kelsey (R-Germantown) is scrutinizing the dealings of Matt Schlapp and the American Conservative Union, according to a report by The Dispatch.

The conservative news site reports federal agents have interviewed current and former ACU employees about financial matters and about what one person called their “knowledge of the events leading up to the endorsement of Brian Kelsey.”

The Tennessee Journal learned in 2019 that state lawmakers had been called in for interviews with Department of Justice investigators to discuss alleged straw donations to Kelsey’s 2016 fourth-place campaign for the Republican nomination for an open 8th Congressional District race. Candidates are prohibited from using money raised for state races in federal campaigns.

As first reported in 2017 by The Tennessean (and later augmented by a complaint filed with the Federal Election Commission), Kelsey’s state committee, Red State PAC, gave thousands of dollars in campaign contributions to fellow state lawmakers, who then turned around and gave donations to his congressional account. The former state Senate Judiciary chairman also had more than $100,000 from his state account transferred to the Standard Club PAC, which then gave money to the American Conservative Union — both directly and through another committee run by conservative businessman Andy Miller Jr. The national group then made independent expenditures on Kelsey’s behalf. Kelsey has denied any wrongdoing.

“It is often difficult to cut through confusing campaign rhetoric to figure out which candidate is the best conservative in a race, but we think this is actually an easy call,” Schlapp said at the time. “If voters in western Tennessee are looking for a proven leader with a conservative track record, the decision is easy. Brian Kelsey is the real deal.”

The nonpartisan Campaign Legal Center filed complaints against Kelsey, the ACU, and others with the the Federal Elections Commission and to the Department of Justice in 2017. Unidentified sources told The Dispatch they had been interviewed in recent months about the Kelsey endorsement.

“They asked me about Matt Schlapp and [ACU Executive Director] Dan Schneider’s involvement within the organization, how they were involved with the disbursements of money and the decision of who to financially support,” one person told the publication. “One of the questions that really stuck with me was, ‘Was Matt Schlapp in those meetings when they decided who to endorse?’ I said yes. And they said, ‘So was he directly involved with the decisions to financially support the candidates?’ I said, I don’t know. And they said, ‘But would it be weird if Matt Schlapp didn’t know?’ I said yes.”

The ACU issued a statement downplaying the probe.

“We are aware of campaign finance allegations lingering from the 2016 election cycle that were reported in multiple press outlets after a Soros-funded group complained,” spokeswoman Regina Bratton said. “We continue to believe ACU’s activities, which took place more than five years ago, were legally compliant. We have been assured that ACU is not a target of any review by the government at this time.”

The Campaign Legal Center, which was founded by Republican former FEC member Trevor Potter, has received donations from George Soros’ Open Society Foundations. The group has filed complaints against candidates of both parties.

A spokesman told The Tennessee Journal in late 2019 that Schlapp had neither been interviewed by federal investigators nor testified before the grand jury.

The statement’s emphasis on events having taken place more than five years ago could be an effort to point out the statute of limitations may have passed for events that took place in the summer of 2016, according to The Dispatch. But federal defense attorney Ken White told the publication that’s not necessarily the case.

“It depends really on whether they have any ongoing conduct,” White said. “For the statute of limitations, one of the many things in the feds’ bag of tricks is using ongoing conspiracies. Let’s say the ongoing conspiracy is to engage in defrauding the federal government in making false FEC filings: The statute on that conspiracy claim doesn’t begin to run until the last overt act in support of the conspiracy. So commonly, you do the FEC filings, and maybe you send someone money that’s the proceeds of the crime. Or you tell someone, ‘don’t talk to the cops’ in order to conceal the crime.”

The Campaign Legal Center’s chief of staff, former FEC lawyer Adav Noti, told The Dispatch the group had not yet received its customary notification that the complaint had been adjudicated despite the fact that it has “been pending a really long time.”

“The allegations in our complaint—they’re really quite bad,” Noti told the publicaiton. “This is not run-of-the-mill shenanigans. It’s true that $100,000 isn’t an overwhelming amount of money, but it’s not nothing for a congressional race in Tennessee, either. And the two-part scheme to route it back to the campaign — if that is indeed what happened, it’s a very serious violation. It’s not a ticky-tack or a technical issue.”

Kelsey reissued his standard statement on the investigation to The Dispatch: “I welcome any investigation because all donations were made in compliance with the law and on the advice of counsel.”