campaign finance

Tenn. lawmaker indicted on federal campaign finance charges is asking for donations

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

State Sen. Brian Kelsey (R-Germantown) recently got his federal trial on campaign finance charges moved until January 2023. Then he started going about the business of raising money for his re-election bid next year.

“The Liberals have found an opponent to run against me!” Kelsey says in the fundraising appeal. “This race is the number one target for Democrats in the state of Tennessee and last election we won by only 51-49%!”

Kelsey makes no mention of his legal issues in the fundraising email.

Prosecutors allege Kelsey funneled money from his state account through other political action committees to a national conservative group to spend on radio ads in support of his ill-fated 2016 congressional bid. Kelsey has denied the charges and denounced the case as a political witch hunt.

It remains to be seen how enthusiastic potential donors will be about giving money to the indicted senator, especially when campaign finance disclosures due at the end of next month will reveal who has contributed to the embattled lawmaker.

Here’s the invite to Jan. 4 the fundraiser:

Kelsey gets yearlong delay for federal campaign finance trial

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 (R-Germantown) has been granted a yearlong delay before the start of his federal campaign finance trial.

Originally scheduled to begin next month, U.S. District Judge Waverly Crenshaw ordered the proceedings to be re-set for Jan. 23, 2023. The motion to delay the case was made by Kelsey’s legal team and unopposed by the U.S. attorney’s office or codefendant Josh Smith.

The attorneys for all parties met with Crenshaw behind closed doors for 45 minutes on Monday morning while Kelsey and Smith urgently whispered to each other in the courtroom that was devoid of spectators other than two reporters. Upon ending the in camera meeting, the public portion of the hearing lasted about 10 minutes to formalize the new trial date, which Crenshaw described as a “firm.”

As previously reported in this week’s Tennessee Journal Kelsey attorney Paul Bruno said in a legal filing he faced a conflict with the original Jan. 18 court date because he is scheduled to go to trial in a quadruple homicide case in Nashville the following week. Bruno added the government has already provided “a significant amount of discovery” in the case and indicated more would be forthcoming. Given the volume of materials in the case, Kelsey and his legal team did not believe they had enough time to prepare for a trial next month.

Prosecutors say Kelsey funneled campaign funds from his state account through other political action committees to the American Conservative Union, the Washington-based organizer of CPAC conferences. The bulk of the money was then allegedly spent on radio ads supporting Kelsey’s unsuccessful bid for the 8th Congressional District in 2016. Kelsey has vehemently denied any wrongdoing and has claimed to be the subject of a political witch hunt.

Report: Durham subpoenaed for Kelsey grand jury

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

Sam Stockard of the Tennessee Lookout has some interesting details on former Rep. Jeremy Durham (R-Franklin) being subpoenaed to testify to the grand jury about Sen. Brian Kelsey (R-Germantown), who was indicted last week on federal campaign finance and conspiracy charges.

UPDATE: Kelsey pleaded not guilty on Monday morning, per the Daily Memphian.

According to the Lookout, Durham was called to testify on March 11:

As part of the subpoena, Durham was required to provide copies of all documents and records related to Kelsey, Kelsey’s wife, Amanda Bunning, his wife, Jessica Durham, Josh Smith, Andrew “Andy” Miller, Zach Crandell, Matt Schlapp of the American Conservative Union, Dan Schneider, Ryan McGowan, Clifford Pintak, Kelsey for Congress, Red State PAC, VoteKelsey.com, American Conservative Union, Citizens 4 Ethics in Government PAC and any entity representing Kelsey and his associated political campaigns.

We know who the Kelseys and the Durhams are, along with Standard club owner Josh Smith and conservative donor Andy Smith. Here’s our best guess at some of the others named in the subpoena:

Schlapp is the chairman of the American Conservative Union, the Washington-based group that puts on CPAC conferences. McGowan is the ACU’s finance director, Dan Schneider is its executive director, and Crandell was the group’s creative director until September. Pintak is a political ad consultant based in northern Virginia.

Durham was also ordered to turn in all records relating to the funds transferred between the various entities and the Standard Club PAC, plus any relevant calendars, diaries, meeting minutes, receipts, or statements, along with emails, text messages, voice mails, phone calls, logs, and metadata. 

Kelsey in a Senate floor speech last week intimated that the chief witness in the case against him had been offered immunity in return for his testimony. Durham and Kelsey have long been close friends.

Kelsey: ‘I’m totally innocent’

Sen. Brian Kelsey (R-Germantown) discusses his federal indictment on campaign finance charges on Oct. 25, 2021. (Screengrab from Zoom call)

State Sen. Brian Kelsey (R-Germantown) hosted a Zoom call with reporters on Monday to denounce his federal indictment as politically motivated. Kelsey appeared with the Senate chamber as the backdrop.

Here’s what Kelsey had to say:

Look, this is nothing but a political witch hunt. The Biden administration is trying to take me out because I’m a conservative and I’m the No. 1 target of the Tennessee Democratic Party. I won my seat only 51% to 49% last time, and the Democrats think this will make the difference. They’re wrong. These 5-year-old, unfounded allegations have been reviewed and re-reviewed. They were wrong then, and they’re wrong now. I’m totally innocent, and I look forward to being cleared at trial.”

Kelsey’s attorney Ty Howard also spoke on the brief call.

“Let me state clearly and empathically from the start, these allegations are false,” Howard said. “Sen. Kelsey committed no crime. He is innocent. And he very much looks forward to his day in court.”

“Despite this ill-considered indictment, Sen. Kelsey and his legal team have great faith in our justice system,” Howard said. “He looks forward to being fully vindicated in a court of law. Out of respect for the legal process, we will take no questions today and this will be our only public comment during the pendency of this matter.

Read the Kelsey indictment here

Brian Kelsey, center with folder in hand, awaits Gov. Bill Lee’s arrival for his second State of the State address in Nashville on Feb. 3, 2020. (Erik Schelzig, Tennessee Journal)

The indictment of Sen. Brian Kelsey (R-Germantown) has led to widespread speculation about the identities of people and organizations mentioned in the charges.

Some are are easier to pinpoint than others. For example, Unindicted Coconspirator No. 2 is described as a “member of the Tennessee House of Representatives from in or around January 2013 to in or around September 2016, when he was expelled.” That description only fits former Rep. Jeremy Durham (R-Franklin).

Political Organization No. 1 is listed as “a nonprofit corporation that hosted an annual political conference, published ratings on Members of Congress and State politicians, and issued political endorsements.” Presumably this refers to the American Conservative Union, which spent money in Kelsey’s congressional bid in 2016.

Individual No. 1 is named as the nonprofit’s director of government affairs who is now married to Kelsey. That description matches Amanda Bunning.

Coconspirator No. 1 is listed as “a Tennessee businessman and prominent political fundraiser and contributor,” who controlled a political action committee that received $30,000 from Smith’s PAC in July 2016. The Tennessean reported in 2017 the Standard Club PAC had given that amount to Citizens for Ethics in Government, the federal committee controlled by Andy Miller Jr.

Here is the full text of the indictment of state Sen. Brian Kelsey (R-Germantown):

I N D I C T M E N T

THE GRAND JURY CHARGES:

COUNT ONE

18 U.SC. § 371

(CONSPIRACY)

At all times material to this indictment unless otherwise indicated:

I.       Relevant Individuals and Entities

1.      BRIAN KELSEY was a practicing attorney and member of the Tennessee Senate, representing District 31, which includes parts of Shelby County, Tennessee. In 2016, KELSEY unsuccessfully ran for an open seat to represent Tennessee’s 8th Congressional District in the U.S. House of Representatives.

2.      Federal Committee 1 was KELSEY’S authorized federal campaign committee.

3.      State Committee 1 was KELSEY’S Tennessee State Senate campaign committee.

4. JOSHUA SMITH was the owner and operator of Social Club 1, a members-only social club in Nashville, Tennessee popular among politicians and Nashville businessmen. SMITH also controlled PAC 1, a Tennessee-registered political action committee

5.      Unindicted Coconspirator 1 (“UCC 1”) was a Tennessee businessman and prominent political fundraiser and contributor. UCC 1 controlled PAC 2, a federal independent expenditure-only committee.

6.      Unindicted Coconspirator 2 (“UCC 2”) was a practicing attorney and member of the Tennessee House of Representatives from in or around January 2013 to in or around September 2016, when he was expelled by a vote of the House.

7.      Political Organization 1 was a nonprofit corporation that hosted an annual political conference, published ratings on Members of Congress and State politicians, and issued political endorsements. Political Organization 1 registered with the Federal Election Commission (“FEC”) as a person or organization making independent expenditures.

8.      Individual 1 was the Director of Government Affairs for Political Organization 1 and a member of Political Organization 1’s senior management team from in or around late 2015 until in or around March 2017. In that role, Individual 1 managed Political Organization 1’s political expenditures during the 2015-16 federal election cycle. Individual 1 and KELSEY became engaged in or around July 2017 and married in or around January 2018.

9.      Individual 2 was a member of Political Organization’s senior management team. He oversaw Political Organization 1’s day-to-day operations, including managing its budget and finances. He worked closely with Individual 1 to direct all aspects of Political Organization l’s political activities, including political expenditures.

10.    Individual 3 was a practicing attorney with ties to Political Organization 2, a nonprofit corporation that publicly advocated on legal and judicial issues.

11.    Individual 4 was a longtime financial supporter of KELSEY’S political career.

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Grand jury indicts Kelsey on federal campaign finance charges

Sen. Brian Kelsey (R-Germantown), right, confers with then-Rep. Matthew Hill (R-Jonesborough) on the House floor in Nashville on April 30, 2019. (Erik Schelzig, Tennessee Journal)

A grand jury has indicted state Sen. Brian Kelsey (R-Germantown) on five counts of violating federal campaign finance laws related to his failed 2016 bid for Congress.

According to the indictment, Kelsey and Josh Smith, the owner of The Standard social club in Nashville, conspired with others to “secretly and unlawfully funnel ‘soft money'” between the senator’s state account and his federal campaign.

“Kelsey and others also caused a national political organization to make illegal, excessive contributions to Kelsey’s federal campaign committee by secretly coordinating with the organization on advertisements supporting Kelsey’s federal candidacy and to cause false reports of contributions and expenditures to be filed with the Federal Election Commission,” according to a Justice Department statement.

The conservative news site The Dispatch reported earlier this month that federal investigators were scrutinizing the dealings of Matt Schlapp and the American Conservative Union about what one person called their “knowledge of the events leading up to the endorsement of Brian Kelsey.”

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.”

Here’s the full release from the U.S. Attorney’s Office in Nashville:

NASHVILLE – A federal grand jury in Nashville Friday, returned a five-count indictment charging Tennessee State Senator Brian Kelsey, 43, of Germantown, Tennessee, and Nashville social club owner Joshua Smith, 44, with violating multiple campaign finance laws as part of a conspiracy to benefit Kelsey’s 2016 campaign for U.S. Congress.  

Acting U.S. Attorney Mary Jane Stewart for the Middle District of Tennessee, Assistant Attorney General Kenneth A. Polite, Jr. of the Department of Justice Criminal Division, and Acting U.S. Attorney for the Western District of Tennessee Joseph C. Murphy, Jr. made the announcement.

According to the indictment, beginning in February 2016 and continuing through mid-October 2016, Kelsey and Smith conspired with others to violate federal campaign finance laws to secretly and unlawfully funnel “soft money” (funds not subject to the limitations, prohibitions, and reporting requirements of the Federal Election Campaign Act [FECA]) from Kelsey’s Tennessee State Senate campaign committee to his authorized federal campaign committee.  Kelsey and others also caused a national political organization to make illegal, excessive contributions to Kelsey’s federal campaign committee by secretly coordinating with the organization on advertisements supporting Kelsey’s federal candidacy and to cause false reports of contributions and expenditures to be filed with the Federal Election Commission. 

In 2016, the FECA limited campaign contributions to $2,700 from any one individual or organization to any one candidate in each election. 

The indictment alleges that Kelsey, Smith, and other unindicted coconspirators orchestrated the concealed movement of $91,000 to a national political organization for the purpose of funding advertisements that urged voters to support Kelsey in the August 2016 primary election, and that the conspirators caused the political organization to make $80,000 worth of contributions to Kelsey’s federal campaign committee in the form of coordinated expenditures.  The indictment alleges other meetings and communications between the conspirators, resulting in the illegal transfers, contributions, and expenditures associated with Kelsey’s federal campaign.

Kelsey and Smith are charged with conspiracy, illegally transferring “soft money” as a federal candidate and his agent, and illegally transferring “soft money” as a state officeholder and his agent. Kelsey is also charged with making excessive contributions to a federal campaign and accepting excessive contributions.  If convicted, they face up to 5 years in prison and a $250,000 fine on each count.

A summons has been issued by the Court and Kelsey and Smith are directed to surrender to U.S. Marshals in the Middle District of Tennessee on or before November 5, 202, at 10 a.m. and both will make an initial appearance before a U.S. Magistrate Judge.

This case was investigated by the FBI.  Assistant U.S. Attorneys Amanda Klopf of the Middle District of Tennessee and David Pritchard of the Western District of Tennessee and Trial Attorney John Taddei of the Criminal Division’s Public Integrity Section of the Department of Justice are prosecuting the case.

An indictment is merely an accusation.  The defendants are presumed innocent until proven guilty in a court of law. 

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

Sen. Brian Kelsey (R-Germantown), right, confers with Rep. Matthew Hill (R-Jonesborough) on the House floor in Nashville on April 30, 2019. (Erik Schelzig, Tennessee Jounral)

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.”

Warner denies federal PPP loan money used to fund campaign

Rep. Todd Warner (R-Chapel Hill) is sworn into the House in Nashville on Jan. 12, 2021. (Erik Schelzig, Tennessee Journal)

Freshman Rep. Todd Warner, one of three Republican lawmakers who had their homes and offices raided by the FBI in January, tells The Tennessean‘s Natalie Allison he didn’t use federal COVID-19 relief funds to pay for his campaign.

Warner, a Chapel Hill businessman, received $149,630 under the Paycheck Protection Program in April. He later loaned his campaign $154,100 in the process of defeating incumbent Rep. Rick Tillis (R-Lewisburg) in the August primary.

Warner told the paper he used the PPP money to cover allowable business expenses, while he separately borrowed the money he loaned his campaign from a bank.

“They question your integrity, whether you’re an honest man when you’ve been blown up and they say you’re bankrupt, which I have been in 2010,” Warner told the paper, adding he had since rebounded financially.

Warner’s company filed for federal bankruptcy protection when he couldn’t pay more than $20 million in debts during the Great Recession.

“It was a sad time,” Warner said. “I hope we aren’t headed there again with the government giving all this money away.”

The FBI also hauled away materials from the homes and offices of former House Speaker Glen Casada (R-Franklin) and Rep. Robin Smith (R-Hixson).

Warner files fundraising report after blaming FBI raid for delay

Rep. Todd Warner (R-Chapel Hill) is sworn into the House in Nashville on Jan. 12, 2021. (Erik Schelzig, Tennessee Journal)

Freshman Rep. Todd Warner, one of three Republican House members who recently had their homes and offices raided by the FBI, has filed a campaign finance disclosure after previously saying he couldn’t access his records because they had been seized by the federal agents.

The Registry of Election Finance ruled this week that it didn’t have the authority to give Warner an extension due to the law enforcement activity and instructed him to reconstruct his report from online filings

According to the report, Warner’s top donations in the fourth quarter were $1,500 each from the PACs of Amazon and House Speaker Cameron Sexton (R-Crossville). He also received $1,000 each from CVS Health, the Marshall County Republican Party, and Rep. Tim Rudd (R-Murfreesboro).

Warner reported raising a total of $9,750 and spending $1,183 during the period.

The other lawmakers searched by the FBI were Reps. Glen Casada of Franklin and Robin Smith of Hixson.

Warner a no-show at Registry hearing over failure to file disclosures due to FBI raid

Rep. Todd Warner (R-Chapel Hill) is sworn into the House in Nashville on Jan. 12, 2021. (Erik Schelzig, Tennessee Journal)

Freshman Rep. Todd Warner (R-Chapel Hill) was a no-show at Wednesday’s meeting of the Tennessee Registry of Election Finance to take up his request to waive his campaign finance disclosure requirement due to an FBI raid on his home and office.

Executive Director Bill Young said Warner had indicated he or his attorney would attend the meeting. But nobody appeared on his behalf.

“The FBI confiscated all files and documents related to my campaign including check copies from donations and checking account ledgers,” Warner said in last month’s email first reported by The Tennessee Journal. “They also took all computers and back ups for the campaign and my business.”

Registry member Hank Fincher said nothing prevented Warner from reconstructing his fourth-quarter disclosure from electronic bank records.

“The FBI took my bank records is not much of an excuse,” Fincher said.

The Registry agreed to send a letter to Warner saying the panel doesn’t have the authority to waive filing requirements.

Rep. David Byrd (R-Waynesboro) also missed filing his report while hospitalized for COVID-19. Family members had alerted the panel only the lawmaker had access to the information needed to make the disclosure. The Registry again determined it wasn’t in a position to give Byrd a pass on filing requirements.