Treasurer John Kennedy Wants To Illegally Transfer State Campaign Donations To Federal SuperPAC

On September 10, 2015, I joined my friends Jeremy White of Red Shtick and Baton Rouge Metro-Councilman and current mayoral candidate John Delgado for an irreverent (and probably not-safe-for-work) political podcast, which was taped at Huey’s in downtown Baton Rouge, an establishment owned by Delgado. We were in the midst of a wild and historic gubernatorial election, so there was a lot to cover.

About an hour in, we were joined by Jason Redmond, who was introduced by Jeremy as one of the state’s biggest political nerds and a long-time staffer for State Treasurer John Kennedy. “I asked you earlier if you were working for his (Kennedy’s) campaign,” Jeremy told Jason, “and you said you were not.”

“I’m not,” Jason said. “I’m working on his federal SuperPAC, Louisiana Proud.”

“Louisiana Proud,” Jeremy repeated.

“Louisiana Proud? Is that a gay rights group?” I joked.

I had never met Jason Redmond, but almost immediately, I realized why he had been entrusted to run Treasurer Kennedy’s SuperPAC, even if I hadn’t been entirely sure of what its purpose was or why it was even necessary. Redmond was funny, smart, self-effacing, and charismatic, qualities that quickly endeared him to me and likely made him one of Treasurer Kennedy’s most trusted and loyal allies for eighteen years.

Technically, the organization’s name isn’t Louisiana Proud; it’s Make Louisiana Proud. And if David Vitter had become the governor of Louisiana instead of John Bel Edwards, there is a good chance no one would have ever needed to remember the organization’s actual name. Redmond was set up in a support role, a loyal staffer reassigned to head up a phantom SuperPAC that would have only needed to serve one purpose: To remind the public why Gov. David Vitter had been wise to appoint John Kennedy to fill his seat in the U.S. Senate.

Unfortunately for Kennedy and Redmond, things did not follow the script. Vitter was defeated by double digits. There would be no coronating appointment. Make Louisiana Proud raised slightly less than $100,000, nearly half of which went toward Redmond’s salary.

Kennedy had severely miscalculated, assuming that a Vitter victory would guarantee him an appointment and the resources necessary to mount a campaign, as an incumbent, only a few months later. Instead of setting up a federal campaign account early on, which could have been interpreted as a pre-emptive move against Vitter- had he decided to run for re-election to the Senate despite his loss in the governor’s race, Kennedy steered nearly all of his donors to his state campaign fund. He was a shoo-in for re-election for a fifth term as State Treasurer. He won by over 80% of the vote, and in the process, he collected more than $2.8 million in donations.

There’s just one problem: You can’t transfer your state campaign fund for a federal campaign. Kennedy’s $2.8 million is useless to his campaign for U.S. Senate. There are different limits and restrictions on donations, for example. Corporations can directly donate to state campaigns, but they cannot donate to federal campaigns. Plus, there is the whole issue of deceiving people for donations for a state campaign for Treasurer and then using their money for a federal campaign for U.S. Senate.

Treasurer Kennedy apparently believes he can find a way around the ethical and legal constraints that are currently tying up his state campaign war chest: Simply and illegally launder all $2.8 million of it to the SuperPAC his loyal, long-time staffer set up months ago, Make Louisiana Proud.

Attorney Ben Ginsberg circulated a memorandum late last week, detailing the reasons why Kennedy’s apparent plan would violate federal law. Quoting, in full:

The issue is whether a Louisiana statewide official can transfer money from his non-federal (state) campaign account to a federal Super PAC run by a political aide as part of that state official becoming a federal candidate.

The answer is “no”.  Such an arrangement would violate the prohibition on a federal candidate or his agent “directly or indirectly establishing, financing, maintaining or controlling” a soft money, non-federal entity that aids his campaign.  11 C.F.R. §300.2(c).

To reach such a determination, the Federal Election Commission (“FEC”) examines 10 factors listed in its Regulation “to determine whether the presence of any factor or factors is evidence that the Committee directly or indirectly established, finances, maintains, or controls the entity.”

The factors relevant to this situation include:

• Whether the federal candidate, directly or through his agent, had an active or significant role in the formation of the entity (ix.)
• Whether the Committee, directly or through its agent, causes or arranges for funds in a significant amount or on an ongoing basis to be provided to the entity (viii.)
• Whether the Committee, directly or through its agent, provides funds or goods in a significant amount or on an ongoing basis to the entity, such as through direct or indirect payments for administrative, fundraising or other costs (vii.)
• If the federal candidate has the authority or ability to hire, appoint, demote or otherwise control the officers or other decision-making employees of the Super PAC (iii.)

Under the facts you describe, the state official and his agent would be violating the rule prohibiting someone who becomes a federal candidate (or his agent) from establishing, financing, maintaining or controlling a soft money entity such as a Super PAC.

In addition, should a state official begin a federal Super PAC and then run for federal office soon after, it would be evidence that the state official has already decided to become a candidate. 11 C.F.R. §100.3((a). That would mean that the transfer to the Super PAC could be construed as an illegal and excessive in-kind contribution from a prohibited non-federal (soft money) source.

Kennedy’s lawyer responded in an article in The Advocate by suggesting that donors are not empowered to control an “entity” merely because they contribute to it, completely missing the point that Kennedy’s donors never contributed to a federal SuperPAC; they contributed to a state treasurer’s campaign account. 

But here is the real kicker: John Kennedy is somehow continuing to convince people to donate to his state campaign fund. He’s raised at least more than $150,000 since the week before his re-election and has continued to pocket donations months after his victory. “A fool and his money,” the old adage goes, “are soon parted.”