NRCC Probe Spurs Reviews

Posted February 8, 2008 at 6:38pm

The FBI investigation into financial irregularities at the National Republican Congressional Committee was triggered when NRCC Audit Committee Chairman Mike Conaway (Texas) asked for an exit interview with the accounting firm that conducted the committee’s 2006 audit, according to a source briefed on the unfolding scandal.

Conaway had been seeking an audit of the committee’s books, and when former NRCC Treasurer Christopher Ward produced one, Conaway — a certified public accountant — insisted on doing an interview with the auditing firm.

After delays and more delays, it became clear that the exit interview was never going to happen and the accounting firm that supposedly conducted the audit was contacted. Officials at the firm, the name of which has not been disclosed, then confirmed to the NRCC that they had not conducted the audit and the letterhead that was used had been forged to look like it was theirs.

“Conaway and some other people said that these audits looked very, very professional,” said one GOP Member, speaking on the condition of anonymity, adding that nothing would have appeared out of order to someone who didn’t do finances for a living.

Ward is alleged to be at the center of an FBI investigation into what the NRCC has publicly described only as “financial irregularities.” Sources have stressed that there is no evidence at this point that money is missing or unaccounted for from NRCC accounts.

Sources familiar with NRCC operations said Friday that in the wake of the audit scandal the committee plans to adjust how it keeps its books and to put controls into place to prevent such problems from happening again.

One Republican insider familiar with the investigation said that, while there’s no evidence linking anyone currently at the NRCC to the scandal, all individuals in direct contact with the “irregularities” have been moved to other positions while the investigation is being completed.

A second GOP insider with knowledge of the investigation said all procedures relating to the NRCC’s accounting procedures are under review.

But this individual, echoing what Members of the House Republican Conference were told last week at a closed-door meeting, said no changes would be made pending the outcome of a forensic audit that is currently under way.

“There’s definitely closer attention being paid to everybody involved in accounting, and everyone at the NRCC is very much being watched,” the second GOP insider said.

The Member who attended last week’s GOP Conference meeting praised the way that NRCC Chairman Tom Cole (Okla.), Rep. John Kline (Minn.) — management subcommittee chairman on the NRCC’s Executive Committee — and Conaway had handled the situation. Those three Members briefed the GOP Conference on Thursday, providing what little details they could about the investigation due to legal concerns.

“I think they’ve done everything by the book. I think they’ve done this in a very cautious manner,” the Member said.

The source said Republicans who knew Ward and had used his services were shocked to hear his name tied to the investigation.

“Everybody who I’ve talked to who knew this guy said he was a real upfront, laid-back kind of guy,” the Member said.

Ward did not return calls seeking comment.

But some Members and K Street insiders are privately grumbling about the way the NRCC has handled the matter.

One well-connected GOP lobbyist said Members have been alarmed by the FBI’s involvement and some have privately questioned whether the NRCC overreacted without knowing the extent of the problem.

Members also are hypersensitive to voluntarily inviting FBI and Department of Justice scrutiny, given the recent spate of investigations into wrongdoing by GOP lawmakers.

“It’s an FBI and DOJ that has very aggressively tried to tie money to legislative actions,” said one well-connected GOP lobbyist. “I think that kind of worries Members some.”

GOP sources also indicated that the FBI investigation may be having a negative impact on the NRCC’s March 15 Spring Gala fundraising dinner, which already was experiencing a sluggish response.

The lobbyist said Members were being slow to make calls for the dinner anyway and that the FBI investigation hasn’t made them feel any more willing to ask for money.

One thing is for certain: The FBI investigation is only the latest headache for Cole and a committee that has struggled to raise money this cycle. Last fall, the NRCC endured a public dust-up between Cole and Minority Leader John Boehner (R-Ohio) over leadership of the committee, and the newly revealed problems only further compound perceptions about the NRCC, even though the investigation is focused on things that happened before Cole’s tenure.

“I think that the unfortunate beneficiary of all these complaints ends up being the NRCC,” the lobbyist said. “This just sort of is like a piling on of what is viewed by many as a place that has issues.”

Meanwhile, Republican candidates and political action committees around the country are scrambling to review their books, replace their finance consultants and reassure donors.

Since 2001, when he co-founded Political Compliance Services with Susan Arceneaux, Ward has provided accounting and compliance services for dozens of campaigns and PACs, according to FEC records. Ward’s work for the NRCC was performed under the banner of his other company, C.J. Ward & Co., and Ron Jacobs, the attorney for PCS, said, “We have heard of no allegation of any impropriety with any of his clients at PCS and have no reason to suspect any impropriety.” Jacobs said Arceneaux and Ward each worked on their own clients, and Arceneaux’s clients are sticking with the firm.

Nevertheless, spokesmen for many of the clients confirmed this week that they have terminated their relationships with Ward and that they are scrambling to hire new financial consultants. For most, a top order of business will be to review Ward’s work to make sure there are no irregularities.

For instance, Rep. Charlie Dent (R- Pa.) has a PAC called Dedicated to Establishing National Teamwork, which paid Political Compliance Services $8,000 in 2006 and 2007, according to FEC records. A source close to the PAC said the group is relatively new and has not raised large amounts of money, but has nevertheless hired a new vendor who will “be going through everything” to make sure the PAC books are in order.

Campaign finance experts said any group that has had Ward doing its books will probably want to conduct a full audit of his work.

Former FEC Chairman Michael Toner said “anyone who employed this guy as a treasurer or a consultant is on notice that they may have a problem. There is an obligation to audit your books and do an internal review to make sure that your books are clean.”

Larry Norton, a lawyer at Womble Carlyle, added that the whole incident offers a reminder to political committees about the importance of having internal controls in place to prevent fraud. “If I were the executive director of one of these organizations and we hadn’t done an audit in a while and didn’t have serious internal controls, the time would be overdue to take care of that.”

Paul Singer contributed to this report.