GOP Cash Machine’s Behavior Is ‘Nothing Short of Scandalous’
“I can’t think of any mechanism or loophole that would permit this. Really,” said former FEC Commissioner Ann Ravel.
WinRed PAC, the for-profit Republican fundraising juggernaut, raised more than $2.24 billion for GOP campaigns and committees in the 2020 election. But somehow, that gargantuan undertaking appears to have cost the PAC almost nothing.
As the old saw goes, it takes money to make money. According to the 13 campaign finance experts interviewed for this article, WinRed has not disclosed possibly tens of millions of dollars in PAC expenses. In doing so, WinRed, which Republican leaders forced on campaigns in the 2020 election, has kept secret the identities of the people and firms who work for it and provide its services. According to these experts, based on WinRed’s disclosures, the PAC appears to have potentially crossed the blurry lines of federal campaign finance laws.
Former FEC commissioner Ann Ravel reviewed WinRed’s filings, and called them “absurd” and “nothing short of scandalous.”
“I can’t think of any mechanism or loophole that would permit this. Really.” Ravel, who stepped down from the agency in 2017, told The Daily Beast. “It has the appearance of being, if not outright fraudulent, at least not complying with the intent of disclosure laws. On its face that’s what any reasonable federal auditor would think.”
“This isn’t like anything we’ve seen on this scale,” Jordan Libowitz, communications director for government watchdog Citizens for Responsibility and Ethics in Washington (CREW), told The Daily Beast upon CREW’s extensive legal review of the disclosures. “With the publicly available information we have, it appears potentially illegal.”
PACs are required by law to disclose their expenses. ActBlue—WinRed’s Democratic non-profit counterpart—reports a range of costs common to virtually all functional PACs. Those payments cover expenses like staff salaries, transaction fees, travel and meals, Uber rides, rent, administrative costs, communications, legal and accounting work, payroll taxes, and bank fees.
WinRed’s PAC claims to pay for none of those things.
Disclosure is the heart of campaign finance law. And if WinRed doesn’t disclose its expenses, that means donors, campaigns, regulators, and the public cannot see who the organization pays.
But according to filings with the Federal Election Commission, the PAC paid a grand total of $1,522.55 for the 2020 election. All of that meager amount went to its sister company, a for-profit corporation called WinRed Technical Services LLC, for “merchandise.”
Over the same period, ActBlue—a nonprofit—raised double that amount, $4.4 billion. It reported spending a little over $42 million on operating costs, about one percent of its total. To put that in perspective, WinRed PAC’s $1,502.55 budget was around 3.57 thousandths of 1 percent the size of ActBlue’s. If WinRed expended 1 percent of its $2.24 billion—ActBlue’s approximate rate—its operating budget would be $22.4 million. (ActBlue declined to comment for this article.)
WinRed’s reports baffled all the campaign finance experts consulted by The Daily Beast, some of whom declined to comment on the record, citing possible conflicts of interest.
Michael Kang, endowed professor of law at Northwestern University, said the PAC is “on shaky legal ground in almost every respect.” Tim Werner, election law specialist at the University of Texas McCombs School of Business, said it appears to be “an incredible grift.” Norm Eisen, senior fellow in governance studies at the Brookings Institution, called it “highly unusual” and pointed to the “striking” contrast with ActBlue’s transparency.
“It’s hard to understand how a PAC of this volume could operate with such minimal expenses,” Eisen said. “It’s so unusual that it’s incumbent upon WinRed to answer these questions. And if they won’t do so, the FEC should make them.”
A spokesperson with WinRed’s public affairs firm—Bullpen Strategy Group—did not answer detailed questions about WinRed’s reporting, with four days of follow-ups. That firm, which the spokesperson said in an email fields questions for the PAC, doesn’t appear on its expenses.
The core issue, campaign finance specialists say, appears to lie with WinRed PAC’s relationship to its sister corporation—WinRed Technical Services LLC. In theory, it is supposed to pass along donations to various Republican candidates.
As WinRed’s website explains it, “Donations made on our platform go to the WinRed PAC and then get transfered [sic] directly to the candidate you want it to go to.”
But the relationship is far more complicated. WinRed’s for-profit arm, WinRed Technical Services (WTS), provides and maintains the technological infrastructure, as well as WinRed’s website and its fundraising landing pages. It also processes and forwards the contributions to the PAC, and acts as a sort of combo merchant bank-billing service between campaigns and their vendors.
The setup is so tangled that it has tripped up veteran Republican campaign treasurers.
With WinRed, it just appears that WinRed Technical Services “does everything,” in the words of Brett Kappel, who specializes in campaign finance law at Harmon Curran. “WinRed PAC, as far as we know, has no employees, but does everything through one vendor—WinRed Technical Services,” Kappel said. “The law requires PACs to pay fair market value for all services, and to report services rendered for free as in-kind contributions.”
Experts said they don’t see how the WinRed PAC could function completely autonomously. It would have to pay for services and overhead, noted Werner, of the University of Texas, “which would also include server expenses, bandwidth costs, maintenance, internet, and the rest.”
FEC rules state that contributions are “all forms of support including money and other things of value.” PAC contributions are capped at $5,000 a year, and they cannot come from companies, such as WTS, and be used to cover all costs. And in-kind contributions must also be reported as expenses in order to balance the books.
“Unless you’re claiming that all of this costs less than five grand per individual per year, there’s not a path to say these are in-kind contributions,” Dan Weiner, Deputy Director for Election Reform at the Brennan Center, said. “And corporations can’t make in-kind contributions to PACs.”
WinRed’s reports do not show any of this spending, and as a private company, WinRed Technical Services doesn’t have to disclose its finances. That means the vendors WinRed contracts will never be public—and neither will their payments.
But there does in fact appear to be an arcane loophole.
A PAC like WinRed can use a separate bank account, called a “nonfederal” account, to accept and spend money. And if WinRed doesn’t give money to state candidates, the PAC can pay vendors with that account and legally keep it a secret.
Libowitz, of CREW, said that if WinRed does exploit this loophole the “legal hocus pocus” is still “clearly a way of intentionally hiding how they spend their money.” But that doesn’t necessarily mean the law will allow it.
“People will often do things under the hope they don't get caught, or that the FEC doesn’t want to enforce the law. But the law always lags behind the people who want to break it,” he said. “Specific schemes don’t get explicitly outlawed or codified until someone tries them.”
Last July, the Campaign Legal Center hit the Trump campaign with a federal complaint alleging a similar lack of disclosure was illegal. The complaint cited hundreds of millions of dollars the campaign paid a shell company called American Made Media Consultants, which then forwarded the money to unknown final vendors. The case is ongoing.
The concealment mechanism has implications beyond WinRed’s PAC. The option is available to any federal PAC in WinRed’s class, including so-called “scam PACs.”
The setup also blinds the campaigns, many of whom were strong-armed into using WinRed for the 2020 election. Republican campaign officials have complained about WinRed’s opacity, which conceals who is making money at their expense. And WinRed’s convoluted transaction model has frustrated a number of GOP candidates and committees, leaving some of them on the hook with the FEC. Rep. Jim Jordan (R-OH), for instance, came under federal scrutiny this year after his campaign misreported roughly $3 million, chalked up in large part to confusion about WinRed’s slicing and dicing.
Campaigns also grumble about the high transaction fees. ActBlue charges a flat rate of 3.95 percent for transactions. And while WinRed charges 3.8 percent, it takes another 30 cents from every transaction, no matter the dollar amount. That adds up to a bigger cut than other Republican processing platforms such as Anedot or Revv, the company launched by WinRed founder Gerrit Lansing for the 2016 election.
Lansing did not reply when asked for comment.
“If I were a GOP campaign, I’d be pissed,” Werner, of the University of Texas, said. “It’s not an issue of ideology or good government. It just sounds like an incredible grift, lining the pockets of unknown companies, and at the cost of candidates who don’t know what this conduit is doing with their money. You don’t know they can be trusted.”