Dole Committee in Spat With FEC

Agency Says Lax Oversight Led to 2002 Embezzlement

Posted November 1, 2005 at 6:47pm

Sen. Elizabeth Dole (R-N.C.), the North Carolina Republican Party and the Federal Election Commission are in a dispute over whether a joint fundraising committee she operated with the state party during the 2002 cycle was responsible for lax management that allowed an employee to steal nearly $175,000 from it and several affiliated organizations.

The Dole North Carolina Victory Committee, a joint fundraising committee established by Dole’s 2002 Senate campaign and the North Carolina Republican Party, is also refusing to pay back more than $80,000 in improper corporate contributions allegedly made to the committee. Lawyers for the DNCVC argue that the funds were stolen from the committee and that the FEC does not have the legal authority to force it to return them.

Cleta Mitchell, who represents the DNCVC, said the most distressing aspect of the disagreement with the FEC is that the DNCVC initiated its own audit of its finances in early 2003 after the committee had shut down operations following Dole’s win the previous November. That review found discrepancies that eventually led to federal charges against Earl Allen Haywood, assistant treasurer for the DNCVC.

Mitchell fears the DNCVC’s decision to go to federal authorities with its concerns about possible financial improprieties at the committee will now lead to punishment by the FEC, discouraging other candidates from self-policing in the future. “This is not the right message for the FEC to send to the regulated community,” Mitchell said.

According to an FEC audit of the DNCVC, the committee failed to establish “proper internal controls” to prevent Haywood from embezzling $174,725 from it and two other joint fundraising organizations with which it was affiliated. The DNCVC raised $2.58 million in the second half of 2002, and transferred $1.9 million to the Dole campaign and the North Carolina GOP.

The FEC report states that too much credence was given to Haywood’s reputation without justification by the DNCVC, which, in the FEC’s view, presented Haywood with an opportunity to embezzle money from it. Haywood pleaded guilty to a felony mail fraud charge last year and was sentenced to 18 months in prison. He is expected to be released as early as today, according to the Federal Bureau of Prisons Web site. Haywood worked on campaigns for Sen. John McCain (R-Ariz.) and other federal candidates prior to joining the DNCVC staff.

“Regardless of Mr. Haywood’s reputation, in the opinion of the Audit Staff, the lack of basic internal controls (e.g. separation of duties) and oversight by DNCVC created an environment that contributed to the misappropriation of funds and the misreporting to the Commission,” the FEC report stated.

The FEC also is challenging whether $81,320 in contributions to the DNCVC were even legal. These soft-money contributions came from corporations, and the DNCVC was not permitted to accept such donations.

The FEC said the DNCVC was refusing to return the checks to the companies that made them because Haywood stole them from the committee, and the DNCVC is therefore not responsible for returning the donations.

Mitchell strongly denied that the DNCVC had done anything wrong in its oversight of Haywood, pointing to a May 24, 2002, memo that laid out the procedures for the DNCVC’s handling of contributions. In a response to the audit report filed with the FEC on Oct. 17, Mitchell said the DNCVC “did establish internal controls,” including “written protocols” separating “receipt/deposit of contributions vs. other responsibilities.”

Mitchell also blamed Haywood for the improper acceptance of any corporate contributions by the DNCVC.

“Allen Haywood — as part of his scheme to victimize the Committee through his theft — confiscated checks, including corporate checks he knew were not to be deposited — held those checks in his possession until well after the Committee’s cessation of fundraising activities, then deposited the checks and disbursed those funds to himself,” Mitchell wrote. “Neither the Committee nor either of its participants received any benefit of corporate contributions run through its bank account and stolen by Allen Haywood.”

Mitchell also pointed out that the nearly $175,000 stolen by Haywood included funds embezzled from two other joint fundraising committees, one of which — the Dole Victory Committee — was permitted to accept corporate contributions until soft-money donations were banned following the 2002 elections. The DVC was a joint fundraising venture between the Dole campaign and the National Republican Senatorial Committee.

A third joint fundraising committee, North Carolina’s Salute to George W. Bush Committee, was established by the Dole campaign, the re-election campaign of Rep. Robin Hayes (R-N.C.) and the North Carolina Republican Party.

Of the $81,320 in disputed contributions flagged by the FEC, $62,670 were in the form of checks made out to the DVC, which could accept soft money.

FEC auditors, however, wondered how those checks ever came into the possession of the DNCVC and noted that the two groups had very similar names.

“It is not clear whether these checks were intended for the [Dole Victory Committee] with a similar name or were the result of the contributors using an abbreviated payee. If the checks were meant for the other committee, it is not clear how they come into the possession of the DNCVC,” the FEC report stated.

But Mitchell attacked the FEC report as inaccurate, adding that the commission has no power to make the DNCVC refund donations it did not receive thanks to Haywood’s activities. Mitchell wants the FEC to rescind its report due these alleged mistakes.

“The report of the Audit Committee is based in errors of fact. There is no legal authority for the Audit Division’s recommendation that the Committee (or its participants) refund contributions which were stolen from the Committee,” Mitchell wrote.

In March 2004, Haywood admitted stealing roughly $174,725 from the Dole campaign using several different routes. Haywood served as assistant treasurer for DNCVC, as well as assistant treasurer for the Salute Committee. His responsibilities included collecting and reporting contributions to the two committees, depositing the contributions in the proper accounts, and filing FEC reports.

According to the Justice Department, Haywood stole $155,750 from the DNCVC and $18,975 from the Salute Committee. Haywood wrote checks to his personal account from the DNCVC , and attempted to cover his tracks by declaring on FEC reports that the DNCVC checks were to cover postal expenses incurred by the committee.