campaign finance

Kelsey’s change-of-plea hearing set for Nov. 22

Sen. Brian Kelsey walks in the state Capitol on March 16, 2020. (Erik Schelzig, Tennessee Journal)

State Sen. Brian Kelsey’s change-of-plea hearing in the criminal case stemming from his 2016 congressional bid has been scheduled for Nov. 22.

Prosecutors last year charged Kelsey with orchestrating the illegal transfer of state campaign funds to a national conservative group to run ads supporting his run for federal office.

Kelsey, who had vociferously maintained his innocence in his few public comments since he was indicted, abruptly changed his tune last week by having his attorneys file a change-of-plea motion.
The move came a week after the guilty plea of co­defendant Josh Smith, the owner of a Nashville private club catering to GOP politicos. It also followed the previous weekend’s arrest of former Rep. Jeremy Durham on drunken driving charges in the city’s downtown tourist district. Durham, a Franklin Republican, is identified as an unindicted co-conspirator in the case, and Kelsey has intimated his longtime friend and political ally was cooperating with prosecutors in the case.

Kelsey, who angrily denied charges, to change plea in federal case

State Sen. Brian Kelsey denies wrongdoing in a video conference call following his indictment on Oct. 25, 2021. (Image: screengrab from call)

State Sen. Brian Kelsey, a Germantown Republican who blamed a political witch hunt for a federal indictment on campaign finance charges, now plans to change his not-guilty plea in the case.

Kelsey’s attorneys made the motion for a hearing on the matter on Thursday. The lawmaker’s codefendant, Nashville club owner Josh Smith, pleaded guilty last week.

Kelsey is accused of illegally transferring money from his state campaign account to Smith’s PAC and then directing the money to be redirected to a national group to spend on his 2016 congressional bid. Kelsey finished fourth in that contest.

U.S. District Judge Waverly Crenshaw has yet to schedule Kelsey’s change-of-plea hearing.

Kelsey codefendant Smith to plead guilty

Sen. Brian Kelsey (R-Germantown), right, attends a Senate Education Committee meeting in Nashville on April 16, 2019. (Erik Schelzig, Tennessee Journal)

Josh Smith, the proprietor of The Standard social club in Nashville, has struck an agreement with federal prosecutors to plead guilty to one charge of funneling soft money to state Sen. Brian Kelsey’s unsuccessful congressional bid in 2016. Kelsey, a Germantown Republican, remains a defendant on all five counts.

Smith’s attorneys say he plans to plead guilty to Count Two of the indictment, which alleges Smith had “solicited, received, directed, transferred, and spent” more than $25,000 while acting as an agent for Kelsey’s campaign for the GOP nomination in the 8th District in 2016.

According to the indictment, Kelsey funneled money from his state campaign account through political action committees controlled by Smith and Andy Miller Jr. to the American Conservative Union (ACU), which then spent $80,000 on radio ads supporting his bid for federal office. It was all for naught, as Kelsey finished a distant fourth in the Republican primary.

Kelsey has pleaded not guilty and denied any wrongdoing. He isn’t seeking re-election this year.

The trial is scheduled for January.

Ogles claimed he raised $453K in first 30 days, but collected only $247K in entire quarter

Turns out Maury County Mayor Andy Ogles wasn’t being truthful when he announced in May he had raised $453,000 in the first 30 days of his campaign for the Republican nomination in the 5th Congressional District. After missing Federal Election Commission’s disclosure deadline by more than a week, Ogles finally reported Saturday he had raised $247,087 throughout the entire quarter.

Another $320,000 came in the form of a loan from the candidate on April 15. Lest anyone think Ogles was counting the loan toward his total in May, he told a reporter at the time his haul didn’t include any loans.

Ogles raised another $17,315 in the pre-primary period and spent a total of $301,063 and had balance of $283,338. But $53,534 of his cash on hand is reserved for the general election, meaning he had a $229,804 balance for the primary.

New TNJ edition: Ethics overhaul getting Lee signature, 5th District developments, slowdown on the Drive to 55

Registry member Tom Lawless and then-Rep. Robin Smith (R-Hixson) confer before Gov. Bill Lee’s State of the State address on Jan. 31, 2022. (Erik Schelzig, Tennessee Journal)

The newest edition of The Tennessee Journal is out. Here is what’s in it:

— Lee signing transparency push into law despite allies’ opposition

— From the campaign trail: Starbuck files suit again, Ortagus advising Winstead, Ogles gets backing and staffing from former outfit.

— State’s college enrollment figures going in ‘wrong direction, very fast.’

— Survey says : Vandy poll gauges attitudes toward abortion, politicians, the economy.

Also: Leadership shakeup at TWRA, Jim Strickland considering third term if voters loosen limits, GOP grapples with crossover voting allegations again, and what’s in a (middle) name?

As always, access the your copy of the TNJ here.

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McNally hits back at ‘blatant untruths’ about campaign finance overhaul

Senate Speaker Randy McNally (R-Oak Ridge) wields the gavel during a floor session to adjust the course of the legislative session in response to the coronavirus pandemic on March 16, 2020. (Erik Schelzig, Tennessee Journal)

Senate Speaker Randy McNally (R-Oak Ridge) is hitting back at what he calls “blatant untruths” being spread about a the campaign finance and ethics overhaul advancing in the General Assembly.

McNally said efforts to get nonprofit “dark money” groups to disclose how much they are spending has caused the most pushback, including over what he called the false narrative that lawmakers are trying to force them to identify their donors.

“It is amazing that various seemingly ‘legitimate‘ groups are resorting to such disingenuous tactics to oppose it,” he said. “Is it because they are spending so much that Tennesseans would be appalled if they knew? Or is it that they spend so little that they fear they would be exposed as political grifters working to enrich only themselves?”

Here’s McNally’s full statement:

There are many blatant untruths circulating regarding the ethics reform bill Speaker Sexton and I have introduced.

The bill in question does not censor or otherwise curtail conservative activism or free speech in any way. Anything conservative groups can do now, they can still do under this bill. The legislation does not restrict their activity at all. The only additional requirement is disclosure.

Openness and transparency in the political process are prerequisites for freedom. For too long liberals, big corporations and corrupt political actors have been allowed to exploit loopholes in our system and operate in darkness.

The original Senate version as well as the current house version does not affect donors at all, just expenditures. It is simply a lie to say otherwise.

This bill is aimed at bad actors like the fictitious Matthew Phoenix and the various shell companies and shadowy PACs used by certain legislators to line their own pockets.

It is amazing that various seemingly “legitimate” groups are resorting to such disingenuous tactics to oppose it.

Is it because they are spending so much that Tennesseans would be appalled if they knew? Or is it that they spend so little that they fear they would be exposed as political grifters working to enrich only themselves?

If you are working to influence the outcome of an election, the voters deserve to know who you are and what you are doing. What could possibly be wrong with that? The fact this is even in question demonstrates the need for the legislation.

UPDATE: Smith strikes plea agreement with feds

Freshman Rep. Robin Smith (R-Hixson) attends a House floor session in Nashville on April 23, 2019. (Erik Schelzig, Tennessee Journal)

State Rep. Robin Smith (R-Hixson) has struck a plea agreement with federal prosecutors over a kickback scheme related to a political vendor called Phoenix Solutions, according to court records.

“Ms. Smith submits that the parties have reached a plea agreement to resolve the pending charges in this case and that she is ready to change her plea in this matter,” according to a filing on Smith’s behalf on Monday afternoon.

A hearing on the matter has been scheduled for Tuesday at 4:30 p.m. Central in Nashville.

Earlier Monday, federal prosecutors made charges agaisnt Smith public alleging she was was joined by two unnamed individuals who are nonetheless easily identified as former House Speaker Glen Casada (R-Franklin) and his onetime chief of staff Cade Cothren.

Smith, a former state Republican Party chair, resigned from the House after being charged.

“I want you to know that serving the great people of this district, and indeed, all of Tennessee, has truly been an honor,” Smith wrote in her letter to House Speaker Cameron Sexton (R-Crossville) “I have resigned with the deepest of humility and out of respect for the role of public service.”

Correction: An earlier version of this post mistakenly referred to an indictment. The charging document was filed as an information.

Read the full charges here:

THE UNITED STATES CHARGES:

BACKGROUND ALLEGATIONS

At all times material to this Information unless otherwise indicated:

1. Defendant ROBIN SMITH was a member of the Tennessee House of Representatives (“Tennessee House”), representing District 26, which included part of Hamilton County, Tennessee. SMITH was first elected to the Tennessee House in or around November 2018. SMITH also owned and operated a political consulting company called Company I. Company 1 provided political consulting, mail, and project management services.

2. Individual 1 was a member of the Tennessee House, first elected in 2003. Individual I served as Speaker of the Tennessee House from in or around January 2019 until in or around August 2019. In or around August 2019, Individual 1 resigned as Speaker after a scandal became public. Individual 1 also owned and operated a political consulting company called Company 2. Individual 1 started Company 2 in or around October 2019 to provide fundraising services to Political Party 1 lawmakers.

3. Individual 2 was a businessman and former Chief of Staff to Individual 1 when Individual 1 was Tennessee House Speaker. In 2019, multiple news forums published allegations that Individual 2 had committed inappropriate and illegal conduct. Based on public reporting, Individual 2 admitted certain allegations, and, on or about May 3, 2019, Individual 2 resigned his position as Chief of Staff.

4. The State of Tennessee (“the State”) allocated Tennessee Representatives $3,000 annually to fund postage and printing of items to be sent to the legislators’ constituents (“the Mailer Program”). According to Tennessee House guidelines, Representatives were permitted to use Mailer Program funds to design and mail “legislative update mailers” and legislative surveys to their constituents. Representatives were permitted to use campaign funds to offset additional expenses beyond the $3,000 allocated under the Mailer Program.

5. The Tennessee House Speaker’s Office had the authority to approve or deny a vendor to provide services or any mailing funded by the Mailer Program.

6. In or around November 2019, Individual 2 established Phoenix Solutions, LLC. Phoenix Solutions was established, with SMITH and Individual l’s knowledge and support, for the purpose of offering mail and consulting services for legislative members facing primary challengers, and was later expanded to offer constituent mail services to members of the Tennessee General Assembly. SMITH, Individual 1, and Individual 2 told others, including members of the Tennessee General Assembly and the House Speaker’s Office, that Phoenix Solutions was run by an individual named “Matthew Phoenix.” SMITH, Individual 1, and Individual 2 claimed that Matthew Phoenix was an experienced political consultant who had worked for Consulting Firm 1, a real company based in Washington, D.C. In truth and in fact, Individual 2 ran Phoenix Solutions and SMITH, Individual 1, and Individual 2 profited from it.

7. SMITH, Individual 1, and Individual 2 knew that Matthew Phoenix was a fictitious person and was, in truth and in fact, Individual 2.

8.SMITH, Individual I, and Individual 2 concealed Individual 2’s involvement in Phoenix Solutions from the State and members of the Tennessee General Assembly due to the expectation that Phoenix Solutions would not be approved by the Tennessee House Speaker’s Office, acting on behalf of the State, or hired as a vendor by individual members if Individual 2′ s involvement was disclosed. SMITH, Individual 1, and Individual 2 also concealed the fact that Individual 2 kicked back a portion of the profits from the State and members of the Tennessee General Assembly to SMITH and Individual 1 due to the expectation that Phoenix Solutions would not be approved by the Tennessee House Speaker’s Office, acting on behalf of the State, or hired as a vendor by individual members Individual 2’s operational involvement and financial interests in the business and the kickbacks to SMITH and Individual 1 were disclosed.

9. SMITH and Individual 1 received kickbacks from Individual 2 in exchange for using their positions as members of the Tennessee House of Representatives to perform official acts, including pressuring the Tennessee House Speaker’s Office to approve Phoenix Solutions as a Mailer Program vendor and disburse State funds to Phoenix Solutions.

10. Individual 2, with SMITH and Individual’s knowledge and support, set up an email account for Matthew Phoenix, matthew@powerofphoenix.com, which Individual 2 used to conduct business on behalf of Phoenix Solutions.

11. Individual 2 incorporated Phoenix Solutions as a limited liability company (LLC) in New Mexico. Individual 2 set up a United States Postal Service post office box for Phoenix Solutions there and forwarded the mail received by that post office box to his home address in Nashville. Individual 2 later explained to SMITH that he established the post office box in New Mexico because that state allows the anonymous registration of LLCs.

12. In or around January 2020, SMITH was informed by an employee of the Tennessee House Speaker’s Office that the Speaker’s Office needed to work directly with the third-party vendor, which was a change in the existing guidelines employed by legislative members for constituent mail. SMITH informed Individual 2 of this fact. Individual 2 was notified that the State could not pay Phoenix Solutions without an Internal Revenue Service Form W-9 on file. In response, Individual 2, assuming the identity of Matthew Phoenix to disguise his true identity, sent a W-9 signed by “Matthew Phoenix” from the matthew@powerofphoenix.com email address to the Tennessee House Majority Caucus Advisor for the purpose of filing it with the State.

13. On or about December 18, 2019, SMITH emailed Individual 2. Referencing a potential future conversation related to Phoenix Solutions with a Political Patty 1 employee regarding a campaign mailing list that each incumbent legislative member was to receive, SMITH told Individual 2 that he “may have to assume the role of Matthew again.” Individual 2 replied to SMITH, “Matthew, reporting for duty!” and included a graphic interchange format (“.gif”) picture of a salute from Harrison Ford’s character Han Solo in the movie Star Wars.

14. On or about January 24, 2020, SMITH emailed Individual 2, writing, “We’ll start with this…Matthew…you might expect some type of call, email.” Below, SMITH copied an email chain between SMITH, the Acting Chief of Staff to the House Speaker, and the General Assembly’s Director of Legislation. In the email chain, SMITH asked the officials about the status of Mailer Program payments to Phoenix Solutions and why there was an issue with processing them. The Acting Chief of Staff wrote SMITH, “I’m on it.” SMITH replied, “Don’t crush her, but [the Director of Legislation has] been telling this vendor that the check’s on the way for about two weeks.” SMITH falsely added, “It’s guys from [Consulting Firm 1] who did mail two years ago that left and started their own gig…tired of doing the DC/Trump stuff. Thanks.” SMITH then forwarded the email chain to Individual 2, adding the message, “Shhhhhhhhhh.”

15. Individual 3 was Individual 2’s girlfriend. At times, Individual 3 assumed the fictitious role of “Candice,” another alleged employee of Phoenix Solutions.

16. On or about June 16, 2020, Individual 3 and Individual 2 emailed each other as “Candice” and “Matthew.” The purpose of the email exchange was to falsely make it appear as if two employees of Phoenix Solutions were having an exchange about the need to secure payment on outstanding Mailer Program invoices that the State had not yet paid. Individual 2, using the matthew@powerofphoenix.com email account, then forwarded the exchange to SMITH.

17. On or about June 22, 2020, SMITH emailed the General Assembly’s Director of Legislation, copying the Acting Chief of Staff to the House Speaker, to complain about delays in Mailer Program payments from the State to Phoenix Solutions. SMITH forwarded them the June 16, 2020, email exchange between “Candice” and “Matthew” complaining about the delayed payments. Above that email chain, SMITH wrote, “[Director of Legislation], I was cc’d on this last week. … It would be either illegal or unethical to move to print without knowing payment was coming, so the bulk permit number is provided on the invoice. Simpler, asking a firm to be liable for the cost with the printing completed before knowing payment may or may not be approved is suspect. Is there something going on?” Enclosed within SMITH’s email were invoices from Phoenix Solutions for legislative mailers on behalf of two Representatives, for $4,547.50 and $5,537.

18. On or about May 20, 2020, SMITH discussed Phoenix Solutions with a member of the Tennessee House Political Party 1 caucus. SMITH described Phoenix Solutions as her preferred survey mailer company. SMITH falsely said that Phoenix Solutions was owned and operated by Matthew Phoenix, an experienced political consultant with whom SMITH did business when SMITH used Washington, D.C.-based Consulting Firm I for political work. SMITH falsely said that Matthew Phoenix and his associate, Candice, got tired of living in the Washington, D.C. area and decided to move back home to New Mexico, where Phoenix started Phoenix Solutions. SMITH falsely said that she used Phoenix Solutions because of the quality of its work.

19. On or about August 10, 2020, SMITH attended a meeting of the Political Party 1 House campaign committee. Present at the meeting were several Tennessee Representatives, officials from the Speaker’s Office, and a committee consultant. SMITH repeated the same false statements regarding Phoenix Solutions that she had made to the caucus member on or about May 20, 2020. She also falsely told the committee members that she did not make any money from Phoenix Solutions.

20. On or about April 2, 2020, Individual 2 sent an email to SMITH and Individual 1. The email stated, “Friends, Here’s our up-to-date printing spreadsheet. All of these checks have been collected and deposited. All bills related to these print jobs have also been paid. So, let me know what address is best for you and I will cut checks for each of you?” Individual 2 provided a breakdown of total profit earned from each client. SMITH, Individual 1, and Individual 2 shared the profits, with Individual 2 earning 30%. Individual 1 and SMITH each earned $4,143.64, which was 25% of the business, each. Individual 2 wrote that the remaining 20% of the profit was “left in business.” Individual 2 also discussed ways to cut Phoenix Solutions’ future costs.

21. From on or about June I, 2020, through on or about December 1, 2020, Phoenix Solutions took on more varied projects, but continued to receive payments from the State-funded Mailer Program and campaign accounts of members of the General Assembly. During that timeframe, a Phoenix Solutions bank account ending in x3886 received revenue of approximately $158,165, excluding payments from campaign accounts associated with SMITH and Individual 2. From on or about January 1, 2020, through on or about December 31, 2020, Phoenix Solutions, Company 1, and Company 2 received approximately $51,947 from the State in payments associated with the Mailer Program.

22. On or about September 10, 2020, SMITH endorsed and deposited check number 152, dated September I, 2020, in the amount of $12,003.16, from Phoenix Solutions’ account number x3886 into a bank account associated with her consulting firm, Company 1. Individual 2 signed the check in his given name and wrote “Consulting” on the memo line.

23. On or about December 17, 2020, SMITH endorsed and deposited check number 170, dated December 16, 2020, in the amount of $12,116.96, from Phoenix Solutions’ account number x3886 into a bank account associated with Company 1. Individual 2 signed the check in his given name and wrote “Consulting” on the memo line.

COUNT ONE
18 u.s.c. §§ 1343, 1346
(Honest Services Wire Fraud)

24. Paragraphs 1 through 23 are incorporated and realleged as if fully set forth herein.

25. Beginning in or around November 2019 and continuing until in or around January 2021, in the Middle District of Tennessee and elsewhere, the Defendant, ROBIN SMITH, aided and abetted by others, including Individual 1 and Individual 2, devised and intended to devise a scheme and artifice to defraud and deprive the citizens of the Middle District of Tennessee and the government of Tennessee of their right to the honest services of a public official, namely the honest services of SMITH and Individual 1, members of the Tennessee House of Representatives, through kickbacks.

26. In the Middle District of Tennessee and elsewhere, SMITH, aided and abetted by others, including Individual 1 and Individual 2, having devised and intended to devise the above­ described scheme, and for the purpose of executing the scheme, transmitted and caused to be transmitted by means of wire communication in interstate commerce, writings, signs, signals, pictures, and sounds.

All in violation of Title 18, United States Code, Sections 1343, 1346, and 2.

FORFEITURE ALLEGATION

1. The allegations contained in this Information are re-alleged and incorporated by reference as if fully set forth in support of this forfeiture.

2. Upon conviction of Count One of this Information, the defendant, ROBIN SMITH, shall forfeit to the United States, pursuant to Title 18, United States Code, Section 981(a)(l)(C), by Title 28, United States Code, Section 2461, any property, real or personal, which constitutes or is derived from proceeds traceable to the offense, including but not limited to a money judgment in an amount to be determined representing the value of the proceeds of the offense.

3. If any of the property described above, as a result of any act or omission of SMITH:

a. cannot be located upon the exercise of due diligence;

b. has been transferred or sold to, or deposited with, a third party;

c. has been placed beyond the jurisdiction of the Court;

d. has been substantially diminished in value; or

e. has been commingled with other property that cannot be divided without difficulty, the United States shall be entitled to forfeiture of substitute property, and it is the intent of the United States, pursuant to Title 21, United States Code, Section 853(p), as incorporated by reference in Title 28, United States Code, Section 2461(c), to seek forfeiture of any other prope1iy of SMITH up to the value of the property listed above as being subject to forfeiture.

Mark H. Wildasin

United States Attorney

Middle District of Tennessee

Indicted senator cites ‘exciting change’ in personal life in deciding agaisnt re-election bid

State Sen. Brian Kelsey denies wrongdoing in a video conference call following his indictment on Oct. 25, 2021. (Image: screengrab from call)

State Sen. Brian Kelsey, a Germantown Republican awaiting a federal criminal trial related to campaign fundraising during a 2016 congressional bid, announced he won’t seek re-election to the General Assembly this year.

“I will not be running for reelection due to a recent, exciting change in my personal life,” Kelsey wrote on Twitter. “And I look forward to spending more time with my family.”

Kelsey initially vowed to seek a rapid trial in hopes of clearing his name, but was later granted a yearlong delay.

After arguing in favor of the state’s school voucher law in a Supreme Court challenge last year, Kelsey was notably not among the speakers when the case was reheard before the state’s highest court last month.

New TNJ alert: What does a stationary bike maker have to do with the Tennessee economy?

Lawmakers attend Gov. Bill Lee’s State of the State address in Nashville on Jan. 31, 2022. (Erik Schelzig, Tennessee Journal)

The new print edition of The Tennessee Journal is out in the world. Here’s what’s in it:

— Are Peloton’s struggles a cautionary tale for the state economy? Lee delivers annual budget address, lawmakers fret about a future economic downturn.

— Removed without delay: Convicted Sen. Katrina Robinson calls ouster from chamber a “procedural lynching.”

— Campaign finance update: Lee raises big money for re-election bid, House GOP haul is down from two years ago, and Casada travels to Santa Fe.

Also: Registry to hold special meeting to take up subpoenas on mystery PAC on March 7, McNally gives Lamberth an inadvertent “promotion,” and the Senate Finance chairman bats down ballpark funding proposal by his hometown mayor.

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Lee raises more than $3M for re-election bid

Bill Lee delivers his inaugural address in Nashville on Jan. 19, 2019. (Erik Schelzig, Tennessee Journal)

Tennessee Gov. Bill Lee will report raising more than $3 million in the period covering the second half of 2021, The Tennessee Journal has learned. The Republican had about $5 million on hand as he began his re-election year.

Lee partially self-funded his 2018 gubernatorial bid. He’s not expected to report any loans to his re-election campaign.

Lee has yet to attract an opponent for the GOP nomination. Several Democrats have announced plans to run against him, including Nashville physician Jason Martin and Memphis City Council member JB Smiley Jr.

Lee last summer reported raising $3.6 million since being elected governor in 2018 and spending $1.85 million over the same period. Lee’s biggest donor since his defeat of Democrat Karl Dean was the Pharma Tennessee PAC, which had given $47,600 through July. Next were $24,600 each from St. Louis-based managed care company Centene and the PACs of H.G. Hill Realty and the David Volkert & Associates construction engineering firm.

The Butler Snow law firm’s PAC has ponied up $20,900, while Amazon and the HDR architecture and construction services company of Brentwood kicked in another $20,000.

The deadline to submit the most recent campaign finance reports is Monday, which is the same day the governor is scheduled to deliver the final State of the State address of his first term in office.