Financially Plagued GOP Group Turns to Trump to Save It

Welcome to Pay Dirt—exclusive reporting and research from The Daily Beast’s Lachlan Markay on corruption, campaign finance, and influence-peddling in the nation’s capital. For Beast Inside members only.

A remnant of the right flank of Ronald Reagan’s Republican Party is hoping Donald Trump can save it from financial ruin.

Americans for Constitutional Liberty (ACL), a “dark money” political nonprofit, has spent hundreds of thousands of dollars in just the last month to boost the president’s re-election effort. The money, more than $600,000 in total, was used to buy pro-Trump direct-mail advertisements, a staple of the group’s political activity since its founding in 1974.

But a glimpse at the group’s financial position suggests it’s not trying to help Trump so much as it’s trying to get help from him. As of its latest annual filing with the Internal Revenue Service, ACL was nearly $9 million in the red. Its own auditors have warned the group that it needs to dramatically scale up its direct-mail fundraising if it wants to stay solvent.

That, it appears, is what the group has done since late January with explicit pro-Trump direct-mail pieces. The $623,000 that ACL has reported spending in that mail campaign marks the first time it’s reported explicit political expenditures to the Federal Election Commission. But all indications are that they aren’t just pro-Trump ads. ACL’s business model is based largely on fundraising through official “political” communications such as these. So while the mailers promote Trump, they almost certainly ask recipients for money as well.

As a nonprofit issue-advocacy group, ACL mostly focused on mainstay conservative matters, such as illegal immigration and the confirmation of federal judges. But Trump’s unique appeal to the conservative grassroots can be a windfall for groups that can effectively court small-dollar donations from his supporters.

And if you believe ACL, it’s arguably the most effective pro-Trump group out there. Now it needs your money. A lot of it.

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Americans for Constitutional Liberty was founded as the Conservative Caucus by Howard Phillips, the late “New Right” icon who worked with prominent Reagan-era Republicans such as Richard Viguerie, Terry Dolan, and Paul Weyrich to build a formidable conservative infrastructure in the mid-'70s.

The Conservative Caucus chugged along over the ensuing years, regularly raising a few million dollars each year, largely through direct-mail solicitations, and using the money to promote various conservative causes. The group rebranded as ACL in 2014 to avoid, it said, the perception that it represents an actual group of lawmakers.

ACL nonetheless takes credit for many of the major legislative gains of the Trump era. Its website’s list of accomplishments includes the confirmation of Supreme Court Justices Neil Gorsuch and Brett Kavanaugh, the 2017 tax overhaul legislation, the repeal of Obamacare’s individual mandate, Trump’s Muslim travel ban, the reduction of illegal immigration from Mexico, and Trump’s acquittal in his recent impeachment trial.

The group’s activism, like that of scores of similar groups, generally takes the form of fundraising for the group itself. Though it isn’t required to disclose copies of its political direct-mail pieces, recipients have posted some copies online that ask recipients to sign petitions for some legislative goal and to also include a donation to ACL.

According to one direct-mail firm that’s worked with ACL, its average donation through such solicitations is $27.45.

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Reliance on small-dollar contributions means ACL is going to need quite a few of them to plug the massive financial hole it’s in. The group’s shortfall has grown every year, as its income has declined from a peak of $6.4 million in fiscal year 2009. But even that year, it ran a $1.1 million operating loss, and repeated deficits have put it dangerously underwater financially.

As of its latest annual IRS filing, which covered the 12 months ending in June 2018, ACL owed more than $8.8 million in debts listed as “accounts payable and accrued expenses.” It brought in just $2.6 million in income that year. That number needed to go up considerably, an accountant said in its audit of those financial statements, and that would require a significant boost in the income ACL gets from its direct-mail program.

“The ability of Americans for Constitutional Liberty Inc. to continue operations as a going concern is dependent upon continuing contributions from members through direct-mail solicitation and revenues generated from other sources exceeding expenses,” the accountant’s report noted. “If the fiscal year 2019 mailings do not lead to an excess of revenues over expenses, management will need to implement contingency plans to meet operating cash requirements.”

Whether or not such contingency plans have been put in place, the group’s FEC filings since last month indicate that it’s stepping up its mail program in an effort to stay solvent—and hoping that the grassroots fundraising opportunity that Trump presents can keep it operational.

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ACL’s fundraising strategy has long blended its ostensible activism with out-and-out requests for money. In nonprofit financial terms, expenses on those sorts of projects are known as “joint costs,” or costs that both advance a nonprofit’s mission and also contain a fundraising component.

In its latest fiscal year, ACL reported $1,773,275 in “program service” expenses, or spending on its actual nonprofit activity. Of that, $1,681,215 was itemized as joint costs. In other words, nearly all of the group’s spending on activity ostensibly related to its mission—direct-mail pieces, email campaigns, online petitions, and the like—also included a fundraising component.

So while fundraising may not be the sole purpose for which ACL exists, it is inextricably linked with virtually everything else it does. Very little of its policy advocacy is not geared toward raising money.

Political groups built on that model have come to be known as “scam PACs,” and have received more attention of late in both the press and the courts. That attention has frequently raised the question of whether political advocates are legitimately advancing their stated political goals through simply raising money.

That’s effectively the position that Republican fundraiser Kelley Rogers took last month as he asked for leniency from a federal court where he’d just pleaded guilty to wire fraud after operating a network of scam PACs that bilked small-dollar donors out of millions of dollars through fundraising appeals that also happened to promote a political candidate.

“Efforts like Mr. Rogers’ are 90 percent public advocacy because they advocate on behalf of candidates and causes in their solicitations,” Rogers’ lawyer told the court. In his client’s defense, he cited comments by former FEC Commissioner Lee Goodman, who made largely the same argument in a public hearing in 2017.

At that hearing, Goodman was going back and forth with a PAC treasurer named Scott Mackenzie, who would later be indicted—and plead guilty—for his role in the very scam PAC scheme that landed Rogers in court as well.

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ACL is a “social welfare” nonprofit, not a political action committee, and so is bound by different rules on its spending and its reporting. But the group’s fundraisers appear to share Rogers’ antipathy toward more zealous regulation of money in politics.

Much of its own fundraising of late has taken place through the direct-mail firm American Target Advertising, which has also handled many of its recent pro-Trump independent expenditures. That firm’s president of corporate affairs, Mark Fitzgibbons, handles compliance with the various state charity regulations that govern solicitations in those states.

“When it comes to giving fundraisers unfettered access to donors and use of the First Amendment to the U.S. Constitution for charitable speech, there are two words that make regulators recoil—Mark Fitzgibbons,” according to a quote in the trade publication NonProfit Times that Fitzgibbons proudly displays on his website.

In his work for ACL, particularly in North Carolina, Fitzgibbons lived up to the reputation. As ACL has engaged American Target Advertising to beef up its fundraising program, Fitzgibbons has sparred with regulators in the Tar Heel State who insist on collecting information on charity fundraisers for its public disclosure program—which aims to ensure that charities and their fundraisers are not duping unwitting donors.

Fitzgibbons feels that the information the state requests is excessive and amounts to “doxing,” and signs document submissions on his firm’s behalf with the addendum “signed under protest and duress, and without waiver of rights, claims, causes of action or defenses, including those based on jurisdiction.”

Compliance with North Carolina’s fundraising disclosure requirements, Fitzgibbons told the office in 2018, “creates a danger to registrants and their families. There are terrorists and Democrats killing those with whom they disagree over politics and religion.”