Cash Cows

01.30.15 10:55 AM ET

Exclusive: Al Sharpton and Newt Gingrich Owe the IRS a Lot of Money

Candidates’ political action committees owe government agencies more than $1 million in outstanding penalties, back taxes, and other liabilities. And you’re stuck with the bill.

By Dave Levinthal / Center for Public Integrity

Go ahead: Break election laws and violate tax rules, inviting federal fines you never pay.

You might just end up like civil-rights leader Al Sharpton, who now hosts MSNBC’s PoliticsNation, a nightly news show that serves as a de facto soapbox for his liberal political views.

On the program, Sharpton regularly defends the IRS, a division of the U.S. Treasury Department, against conservatives’ criticism that the agency gave special scrutiny to right-leaning nonprofit groups,

“There was no conspiracy for the IRS to target conservatives. So why are some Republicans so obsessed about all of them?” Sharpton shouted during a show last February.

What Sharpton doesn’t tell viewers is that his 2004 presidential committee owes the U.S. Treasury $19,500 a decade after being caught accepting illegal campaign contributions, according to federal records. It also owes the Federal Election Commission several thousand dollars in unpaid fines, even after paying off a separate $208,000 penalty in 2009 for several campaign violations.

Sharpton’s saga, while extreme, is hardly unique.

Dozens of political committees together owe government agencies—and therefore, taxpayers—more than $1 million in outstanding penalties, back taxes, and other liabilities, a Center for Public Integrity analysis of federal records shows. Some debts are more than 15 years old.

The government’s anemic campaign law-enforcement efforts and plodding debt-collections process are largely to blame for this growing cache of overdue debt, owed by Democrats and Republicans alike. Overburdened regulators spend little time chasing offenders, especially political committees that fade into insolvency and irrelevancy after violating the law.

Consider the FEC: Tasked by law with fining political committees that break election laws, the agency itself has no real power to make them pay.

And the way the laws are written, the politicians themselves, including also-ran presidential candidates Newt Gingrich, Herman Cain, and Gary Bauer, aren’t personally responsible for the debts their campaign committees have incurred.

Debtor political committees offer various reasons—no money, no staff, standing on principle against the government—for not paying money federal officials say they owe. Some offer no reason at all.

The situation is “disturbing,” said FEC Chairwoman Ann Ravel, a Democrat, who acknowledged the FEC can’t do much about political committees that don’t voluntarily pay their fines.

“Only when there are real consequences is there respect for the law,” Ravel said. “There aren’t real consequences now.”

Excuses, excuses

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Don’t expect Sharpton to pay the government any time soon.

Sharpton spokeswoman Jacky Johnson this week offered no timetable for payment of the lingering debts, which rank among Sharpton’s numerous financial woes, both personal and political.

Former Sharpton spokeswoman Rachel Noerdlinger told the Center for Public Integrity in 2013 that Sharpton intended to address his campaign debt problems. But as of late last year, his old campaign still owed a host of creditors more than $880,000.

MSNBC spokeswoman Rachel Racusen declined to comment on Sharpton’s situation or the money his presidential committee owes the Treasury and FEC.

Gingrich, for his part, is Sharpton’s debt-dodging analogue among Republicans.

Federal records from October indicate Gingrich’s “Newt 2012” presidential campaign owed the IRS $26,507 for an “income tax liability” and “income tax payment” as of Sept. 30.

Newt 2012’s IRS debt is just one of dozens that his campaign still owes to entities ranging from Comcast to Twitter to Herman Cain Solutions, a political and consulting organization run by its namesake, the former 2012 Republican presidential candidate. The debts together total more than $4.6 million; Newt 2012 raised a meager $37,822 during 2014’s fourth quarter, with about half that money coming from the campaign renting the personal information of supporters to a data broker. 

Taylor Swindle, chief financial officer for Gingrich’s media company Gingrich Productions, said this week the Newt 2012 committee has “paid off the IRS since that October filing.” An updated disclosure Newt 2012 made Wednesday with the FEC indicates the committee paid off most of its IRS debts in late 2014 but still owed the tax agency $1,007 as the new year began.

Gingrich until last year served as co-host of CNN’s now-defunct Crossfire. He remains a regular commentator for the news network and a staunch critic of the IRS in recent years, writing in 2013 that “President Obama owes Americans an explanation as to why he looked the other way while the IRS continued its evasion and dishonesty” following revelations that the agency targeted some conservative nonprofits with extra scrutiny.

CNN spokespeople did not respond to numerous requests for comment.

Cain, in all likelihood, would welcome the $16,525 Gingrich’s campaign owes him.

That’s because Cain’s own 2012 presidential campaign committee, Friends of Herman Cain, still owes the FEC $12,500 stemming from a fine for accepting more than $186,000 in improper campaign contributions, then not refunding them in a timely manner. The Cain committee on March 27, 2014, settled with the FEC and agreed to pay a $19,000 penalty, which is due in full two months from now.

Friends of Herman Cain spokesman Mark Block, who earned minor fame during 2011 thanks to a quirky Cain campaign commercial where he smokes a cigarette, said in an email that the committee “will be in compliance” with its debt-payment agreement come March.

Cain now hosts a syndicated, self-titled radio show that airs weekdays.

One of the oldest debts still on the federal government’s books belongs to the 2000 presidential campaign committee of Bauer, a Republican and longtime political operative who now leads Virginia-based conservative nonprofit group American Values.

Bauer’s campaign owes the IRS $10,454, federal records show. Bauer spokeswoman Kristi Hamrick said, “The plan is to repay that.”

In recent years, Bauer, like Gingrich, has been an outspoken critic of the IRS. In a 2014 message to supporters, for example, Bauer accused the IRS of “left-wing corruption.”

Long collection process

Many political committees pay their FEC fines and IRS taxes promptly.

But those who don’t should expect a protracted collection process that, in the end, doesn’t amount to much.

For fines generated by the FEC, here’s how the collection process works—or doesn’t: Once the FEC slaps a political committee with a penalty, its legal office drafts an agreement that usually demands full payment in 30 days.

If a committee doesn’t pay, the FEC sends a warning letter.

After 180 days, the FEC refers the offending committee to the Treasury and eventually transfers the unpaid fine to that agency for collection.

At that point, the FEC, which hasn’t had a general counsel since mid-2013, more or less gives up on collecting on its fine, unless it chooses to sue a committee in federal court, which these days, it almost never does.

Treasury’s Bureau of the Fiscal Service might use any of several methods to compel debtors to pay up. They include reporting them to credit bureaus, garnishing wages, siccing private collection agencies on them, or “referring debts to the Department of Justice for action.”

The Department of Justice, however, rarely takes action against deadbeat political committees except in the most extreme circumstances. In 2013, it pursued Rep. Jesse Jackson Jr. for stealing hundreds of thousands of dollars from his campaign to buy high-end electronics, a Rolex watch, and the like. (Jackson’s campaign committee also owes the government more than $16,000 for election-law violations.)

Most FEC fines only name a political committee, not a human being, as responsible for paying, rendering threats like garnishing wages or dinging credit toothless. The FEC does not have statutory power to make a political candidate responsible for the debts of his or her political committee.

The Bureau of the Fiscal Service also lacks the resources to pursue every debt under its purview with equal vigor. It employed the equivalent of 108 full-timers during 2014 to handle all federal debt-collection efforts, according to federal budget records. IRS spokesman Bruce Friedland declined to comment. Treasury spokesman Daniel Watson said his agency’s debt-collection efforts, detailed in a document on its website, speaks for itself.

“Some of the debts are too small for them to consider worthwhile,” said Larry Noble, who served as the FEC’s general counsel from 1987 to 2000. “Meanwhile, meaningful enforcement for groups that don’t comply [with the law] has pretty much broken down.”

Ravel, the FEC chairwoman, said she plans to contact Treasury officials to discuss options for more aggressively collecting political committees’ debts. Matthew Petersen, the FEC’s Republican vice chairman, could not be reached for comment.

Fight the debt

Leaders of some political committees say they’re going to fight, or even ignore, their government debts.

Julien Modica, a Democrat who unsuccessfully ran for U.S. Senate in Virginia in 2012, says the FEC failed to consider he was caring for his dying father in Great Britain when it fined his campaign for three election-law violations.

The FEC says Modica’s committee owes nearly $27,000.

Modica, whose Modica for Senate committee is broke, says he will fight the FEC in federal court in a bid to clear the fines.

“I’m an asshole when it comes to paying people off who don’t deserve to be paid,” Modica said. “They took advantage of me. I’m frustrated. You don’t know the effort I put into telling these FEC people to knock it off, and they wouldn’t listen. It’s harassment.”

Joseph R. John, chairman of the Combat Veterans for Congress PAC, contends former IRS nonprofit division chief Lois Lerner—a scourge of many conservative activists for her staff’s role in the conservative nonprofit targeting scandal—is responsible for convincing the FEC in 2011 to fine his political action committee.

As far as the federal government is concerned, the California-based committee, which reported about $5,600 in available cash through Dec. 31, owes it about $8,700.

“We were absolutely blameless of all charges and have not recognized or paid the illegal fine imposed because of Lois Lerner’s influence,” John said.

Dan Backer, a conservative election-law attorney who represents Combat Veterans for Congress PAC, says the committee will continue to fight the fines as long as it has recourse. A hearing on the fine is scheduled for next week in federal court.

Strength and Liberty PAC, which spent $20,000 to oppose Republican presidential candidate Mitt Romney during 2012, is pleading poverty for not paying $3,300 it’s owed the government for more than two years after not filing campaign disclosures on time.

“The committee has no money,” Strength and Liberty PAC treasurer Louis Barnett said. “I don’t know what else to tell you.”

Then there’s the Missouri Democratic State Committee. Officials there said they aren’t exactly sure why they owe $5,675 to the IRS.

Their own disclosures last year to the FEC indicate the debt is related to it receiving “excessive contributions” it never disgorged. It’s one of a dozen debts on the committee’s books.

Michael Toner, a Republican lawyer and former FEC chairman, says the government must balance holding political committees accountable with the value of investing time and resources into making small-time political actors pay them money they won’t ever have.

“You can’t get blood out of a turnip,” Toner said.

But Rep. John Sarbanes (D-MD), who’s sponsored numerous pieces of campaign-finance reform legislation, disagrees.

“There ought to be aggressive enforcement because there should be consequences for going against the law regardless of who you are,” Sarbanes said. “For too many committees, fines are just a cost of doing business to them.”

If all else fails, there’s one sure-fire way to avoid paying an FEC fine: die.

That’s what 85-year-old Abe Hirschfeld did in 2005, the year after the FEC fined his “Honest Abe Hirschfeld for United States Senate” committee more than $105,000 for six separate campaign finance violations.

A decade later, Honest Abe still appears in no hurry to pay his penalties.