In recent weeks, a number of news reports have delved into the legal questions about a super PAC generating hundreds of thousands of dollars in corporate revenue from a popular podcaster: Sen. Ted Cruz (R-TX).
While legal experts cited in those reports have floated serious potential campaign finance issues with the arrangement, it appears that Cruz—a notorious Federal Election Commission troll—may have landed upon yet another seemingly unprecedented loophole in election laws: He’s turned a super PAC supporting him into a media company—and is funding it himself.
That doesn’t mean Cruz’s podcast arrangement with corporate media giant iHeartMedia is necessarily aboveboard. In fact, in conversations with The Daily Beast, experts in campaign finance regulations, government ethics, and tax law raised a slew of potential legal and ethical issues, with Cruz characteristically darkening the gray area.
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But the most basic details about the arrangement still haven’t been clarified, and none of the parties involved—including iHeartMedia—will answer those simple central questions.
Additionally, The Daily Beast has uncovered new information, with campaign finance records showing tens of thousands of dollars in iHeart lobbyist contributions going to the Cruz campaign. Since the podcast deal was inked in late 2022, the Cruz campaign has received donations from at least seven lobbyists registered to represent iHeartMedia’s interests before the federal government, records show, raising even more questions about the nature of the deal.
Central to the conundrum is Cruz’s claim that he doesn’t get paid for the podcast. Instead, both he and iHeartMedia say he volunteers his time.
But that doesn’t mean Cruz isn’t generating money for his personal interests. Rather, the nest of financial relationships—between a sitting official and candidate for office, a super PAC supporting him, a corporate partner in a political broadcast, and a slate of lobbyists—presents issues that are both unavoidable and unprecedented.
And despite numerous news reports, along with a 2022 ethics complaint, the central facts of the arrangement itself are still cloudy. Cruz is just thriving in the haze.
What’s clear is that in the fall of 2022, iHeart entered into some sort of corporate partnership involving a pro-Cruz super PAC—called “Truth and Courage”—to produce, distribute, and monetize the senator’s hit podcast, “Verdict with Ted Cruz.” Since last March, the podcast has generated about $630,000 in advertising revenue for the super PAC, with another roughly $3,500 trickling in from Google.
Importantly, the law prohibits coordination between candidates—who are limited by how much money they can raise—and super PACs, which can raise unlimited amounts of money from individuals and corporations. Federal law states that a federal candidate or officeholder—“or an entity directly or indirectly established, financed, maintained or controlled by or acting on behalf of one or more candidates or individuals holding Federal office”—shall not “solicit, receive, direct, transfer, or spend funds” in connection with a federal election outside of the limits and reporting requirements of federal election law.
Sen. Ted Cruz (R-TX) talks with members of the media in the Capitol.
Photo by Nathan Howard/Getty ImagesPut simply, a candidate can’t raise any corporate money—let alone hundreds of thousands of dollars of it—into a super PAC. The financial boost is coming at a critical political moment, as Cruz faces a potentially tough challenge for re-election this year from Rep. Colin Allred (D-TX), who’s been outraising Cruz.
Campaign finance experts told The Daily Beast that, even if Cruz isn’t breaking the law, he’s certainly testing the limits.
That’s because Cruz isn’t technically “raising” money for the super PAC; he’s earning it. The iHeart payments to the super PAC aren’t reported as donations, but as “digital revenue.” And as legal experts told The Daily Beast, the law doesn’t prevent super PACs from generating outside revenue. It’s actually common for PACs to report revenue from things like dividends, interest income, and sales of assets like campaign vehicles or donor contact lists.
But while the concept of PAC revenue isn’t new, these experts agreed, the iHeart arrangement raises a prospect entirely unique to Cruz: that a super PAC can essentially moonlight as a media company.
While the future implications of this innovation aren’t clear, the model could certainly appeal to other media-savvy candidates who might want to monetize their audiences. This includes House members like Matt Gaetz (R-FL) and Alexandria Ocasio-Cortez (D-NY), along with the king of earned media himself, Donald Trump, who could likely generate millions of dollars with an arrangement like Cruz’s.
Super PACs might also tap non-candidates, like politically motivated commentators and influencers, for a steady shared-revenue stream, then try to use that money as literal political capital to influence any number of federal elections.
Jordan Libowitz, communications director for Citizens for Responsibility and Ethics in Washington, said that while he’s never seen a political group try this, it looks like Cruz and the super PAC could get away with it.
“What seems to be going on here is he’s treating this political group not through the standard fundraising that it would do, but instead, basically treating it as business, and that it’s making money off of his podcast, as if it were just making money off of selling T-shirts,” Libowitz told The Daily Beast.
“It’s so wild it’s never occurred to someone to do this before,” Libowitz said. “The traditional way is: find rich people and ask them for money. And that’s been pretty successful over the years.”
Brett Kappel, a campaign finance and government law attorney at Harmon Curran, concurred that this aspect of the arrangement would likely pass legal muster—precisely because the legal framers never anticipated it.
“Neither federal election law nor the tax code contemplated income from a committee providing goods and services,” Kappel told The Daily Beast. “The conception is that committees received contributions and could invest that money, and then receive passive income from dividends and interest. No one contemplated that a PAC could be involved in a business and receive income from that.”
That revenue, however, is not exempt from federal income tax—with the 2023 payment due next week.
But not all experts saw it as unique. Brendan Fischer, a campaign finance lawyer and deputy executive director of Documented, told The Daily Beast that PACs have previously dabbled in private enterprise, just not to the extremes that Cruz has taken it.
“It isn’t entirely unprecedented for a super PAC to be involved in revenue-generating activities,” Fischer said, pointing to the super PAC for the Minocqua Brewing Company—a politically engaged “progressive beer” company, which names brews after Democratic politicians and donates 5 percent of profits to an affiliated super PAC.
“But the distinction there is that the candidates were not obviously involved,” Fischer said.
Still, it’s that question—the direct participation of the candidate—which is central to the legality of the Cruz arrangement, these experts said.
“Depending on the details of the podcast contract, Cruz may have violated the ban on federal candidates directing big money or corporate funds to a super PAC,” Fischer said.
Those terms are, of course, still almost entirely private.
In response to The Daily Beast’s questions, an iHeart spokesperson reiterated that Cruz volunteers his time and is not compensated for the podcast, though his co-host Ben Ferguson gets a cut.
After that, the answers get less clear.
For instance, the spokesperson refused to answer multiple direct inquiries about the most basic issue: exactly who was party to the contract, which could include Cruz himself (though his financial disclosures don’t list an agreement with iHeart) along with potential LLC third-parties.
The spokesperson also never confirmed that the super PAC or iHeart were signatories of the contract. (Previous statements have said that the payments are “associated with” ad revenue.) The spokesperson even raised another layer of distance from iHeart, explaining that an iHeart subsidiary called Premiere sells the actual ad inventory, with the super PAC payments coming from “iHeartMedia” as the parent company.
But most critically, the spokesperson never answered what role Cruz had in assigning the ad revenue or when he became involved. Questions to Cruz’s office and various people and entities directly affiliated with Truth and Courage went unanswered.
“It is incredible that he chose to direct the funds to a super PAC rather than to charity,” Fischer said. “There are countless charities in Texas that would benefit enormously from a $600,000 donation.”
Fischer, along with every expert interviewed for this article, said it would also require serious suspension of disbelief to allow that Cruz was not involved in the decision to direct the money to the super PAC.
Sen. Ted Cruz (R-TX) listens during a news conference at the U.S. Capitol.
Photo by Anna Moneymaker/Getty ImagesFirst, these experts suggested the relationship between Cruz and this super PAC is already problematic. The Daily Beast previously revealed reams of circumstantial evidence showing a tight-knit working relationship between the candidate and this supposedly independent outside group: They raise money from the same donors, they employ the same operatives (including Cruz’s former scheduler, Christine Babcock, whose LLC has collected more than half a million dollars through the super PAC since 2022), they have the same initials, and they pay the same vendors—sometimes down to the same local restaurants.
During the 2022 midterms, Cruz even went on a multi-state bus tour sponsored by the supposedly independent super PAC.
The original mastermind behind the super PAC—former Cruz campaign manager Jeff Roe—also pushed the coordination envelope to new extremes with his work on the ill-fated pro-Ron DeSantis’ super PAC, “Never Back Down.”
Kappel, the Harmon Curran attorney, pointed to DeSantis as a model for Cruz’s plausible deniability.
“The way [this podcast arrangement] could be done is the way Ron DeSantis ran his presidential campaign—the super PAC runs everything and they just invite Ted to show up,” he said. “Can this be done on paper so it looks legal? Yes. But you have to accept the fiction that he’s unaware of all of this until it happens.”
Kappel also pointed to another lever at Cruz’s disposal—the cynicism of his allies in the FEC.
“The odds of the FEC sanctioning him for this are astronomically low,” Kappel said, noting that Cruz’s former chief counsel, Sean J. Cooksey, is now a Trump-appointed FEC commissioner—one who has consistently demonstrated an ideological reluctance to pursue alleged violations.
But the podcast wasn’t always a super PAC production. In fact, when the pod first launched in January 2020, Cruz funded it himself through his leadership PAC. But within a week, Verdict was the No. 1 overall podcast on iTunes. (Early episodes covered issues still at the forefront of politics, such as Hunter Biden testifying before Congress, Roe v. Wade, and Adam Schiff’s statewide candidacy.)
“This stuff, I’m sure, plays very well in a California Democratic primary,” Cruz said about Schiff’s impeachment performance.
As the podcast developed, its scope expanded. Cruz tapped his rolodex for a wide range of special guests, including then-Attorney General Bill Barr, Hollywood star Jon Voight, and then-acting Deputy Secretary of Homeland Security Chad Wolf. He often released more than one episode a week, and today, four years later, he has recorded more than 400 episodes. While Verdict no longer tops Apple’s charts, it’s still among the top politics podcasts, according to Chartable, beating out Sen. Bernie Sanders’ (I-VT) new show.
Over those first two years, Cruz also paid a Texas entity called “Reagan Investments LLC” a combined $2.3 million from his leadership PAC for “sponsorship advertising.” (No other PAC or campaign has ever paid Reagan Investments LLC—save for one of Trump’s political committees, which in December 2020 paid $235,000 for copies of Cruz’s book.)
Then, in 2022, the payments shifted from the leadership PAC to the super PAC. In that one year, Truth and Courage paid Reagan Investments LLC nearly $1.6 million for services related to “media production.”
This means that Cruz’s iHeart deal not only netted $630,000 in a year, it also saved potentially much more than that—a one-year swing of possibly more than $2 million. Since the iHeart deal, Truth and Courage has paid around $240,000 in production costs to a Houston entity called “The Production Companies.”
Asked about the arrangement on Monday, a representative for The Production Companies told The Daily Beast, “Nobody is available to speak on that matter.”
At some point in 2022, Cruz claims the podcast caught the attention of iHeartMedia. And in an Oct. 7 episode—one month out from the midterms—Cruz and his first co-host, professional conservative complainer Michael Knowles, announced the new corporate partnership. (The episode itself encapsulated the closeness between Cruz and his ostensibly independent super PAC, with Knowles calling the super PAC’s ongoing cross-country midterm junket a “campaign bus tour.”)
“They came and—and they saw what was happening on this podcast,” Cruz said of iHeart’s overtures at the time, speaking reverently of other figures on the media giant’s roster, including Rush Limbaugh, Sean Hannity, Glenn Beck, and Jesse Kelly.
Notably, Cruz took the deal even though it meant replacing his longtime co-host. Without any detectable irony, Knowles told the audience that his contract with right-wing outlet The Daily Wire presented a conflict of interest, and that he would have to step aside. He was replaced with Ben Ferguson, who still co-hosts Verdict today.
But as Cruz soldiered on without Knowles, watchdog groups flagged Cruz’s own conflicts of interest. Two months later, the bipartisan nonprofit Campaign Legal Center filed a complaint with the Senate Ethics Committee, alleging that Cruz’s deal with iHeart violated the ban on accepting gifts from registered lobbyists. The complaint noted that iHeartMedia retains a stable of lobbying firms to the tune of millions of dollars a year, and that its corporate PAC had previously donated $2,000 to Cruz’s 2018 re-election campaign.
Those issues persist today—and can be found in new places, such as the podcast’s page on the Premiere Speakers Bureau booking agency website. (The booking agency is unaffiliated with Premiere, the iHeartMedia subsidiary that handles the podcast ads.)
Danielle Caputo, legal counsel for ethics at CLC, told The Daily Beast that the Premiere Speakers Bureau (PSB) page raises even more ethical questions.
“Cruz has maintained that he doesn’t get paid from the podcast, but it’s not clear if that includes these appearances,” Caputo said. She singled out two potentially applicable ethics restrictions—the gift ban, and the prohibition on receiving speaking fees.
“Even if he’s not receiving money from that live session, he’s still receiving something of value from these appearances,” she said, referencing the gift ban. Free access to a platform, to a specific venue, or even to an audience could be construed as a thing of value for a senator, Caputo said, and it could potentially violate Senate gift rules.
“The audience here may be something of value to Senator Cruz for a number of reasons,” she said, noting that PSB has partnerships with major companies, including Pepsi and Keller Williams Realty, which Cruz might want to cultivate “in a way that may benefit him and his campaign, or him personally when he leaves office, or maybe even just a benefit for his podcast.”
The speaking fee question, Caputo said, is even more cut and dried. “If he’s getting paid directly for these appearances, it definitely implicates the honoraria ban and also may violate outside earned income rules,” noting a limited exception if those proceeds are donated to charity, with a cap of $2,000.
But again, Cruz is walking a legal and ethical tightrope.
Caputo’s colleague at CLC, Kedric Payne—the group’s vice president and general counsel for ethics—said Senate rules would not appear to prevent Cruz from allowing a podcast to profit from his name, since those rules are typically understood to apply to firms in a certain range of industries, such as banking, consulting, and architecture.
“It would be hard to say that the podcast would fall under that,” Payne said, noting that podcasting appears similar to other exempted activities, like writing, transcribing, and—following a 1982 ruling—race car driving.
Dylan Hedtler-Gaudette, senior government affairs manager at the Project on Government Oversight, told The Daily Beast that, while the Senate Ethics Committee has interpreted the honorarium ban to exempt activities related to a member’s specific talents, that wouldn’t fly here.
“In this case, I think it’s probably pretty clear that the only reason that Ted Cruz has a podcast is because he’s a Senator,” Hedtler-Gaudette said.
While he allowed that Cruz might find a way to “thread the needle,” he said that the podcast “really does violate the spirit” of the ban. That, however, puts the pressure back on the institutions to enforce their codes more meaningfully.
“The Senate Ethics Committee, in particular, is notorious for not doing anything at all to hold its own members accountable, even in the face of serious allegations,” he said. “In the interest of collegiality and the insular culture of the Senate, they just really don’t do anything—at all—ever.”
Last year, Cruz’s GOP colleague Sen. Lindsey Graham became the first sitting senator since 2018 to receive a public opprobrium from the Ethics Committee, for raising political cash in the U.S. Capitol complex. But the committee is notoriously lax. And although the House has an independent Office of Congressional Ethics, there’s no equivalent outside investigative body in the Senate.
Of course, there’s another corporate and ethical wrinkle: the advertisers.
Verdict has had dozens of advertisers, including some explicitly right-wing companies as well as some more mainstream ones. Until recently, one of them was energy company BP America, which the Dallas Morning News recently reported pulled its ads after learning that the money funded a super PAC. As a federal contractor, BP is banned from contributing to any federal political committee. The company did not respond to The Daily Beast’s comment request.
At least one other advertiser on the show—LMI, a management consulting firm—is a government contractor as well, according to Defense News. LMI did not respond to questions about whether it was aware of Cruz’s arrangement.
A review of campaign finance and lobbying records reveals even more overlap.
Cruz’s campaign committee has received political contributions from at least 15 employees at nine firms that have, since the podcast launched in 2020, registered to lobby the federal government on behalf of iHeart, according to a comparative analysis of FEC records and lobbying data from the Center for Responsive Politics. Seven of those employees registered to lobby for iHeartMedia specifically, and all seven contributed to the Cruz campaign after he signed the 2022 deal—for a combined $20,300 in campaign donations over the last two election cycles.
Libowitz, from watchdog Citizens for Responsibility and Ethics in Washington, said that the donations raise “serious questions” about the podcast agreement.
“iHeartMedia lobbyists gave thousands of dollars to Sen. Cruz in an attempt to influence him politically—it’s why lobbyists give money. That Cruz was also essentially working for iHeartMedia at the time, with money from iHeartMedia flooding into his political operation, raises serious questions about the nature and intention of that deal,” Libowitz said.
“Was iHeartMedia considering its federal lobbying efforts when it entered into the Cruz deal?” Libowitz wondered.
Caputo, however, pointed out that nothing in the law prevents lobbyists from making campaign donations while also lobbying a Senator.
“However, when iHeart and Senator Cruz entered into a syndication agreement for his podcast, Senator Cruz likely violated the Honest Leadership and Open Government Act by receiving the gift of syndication and iHeart likely violated the law by knowingly violating HLOGA,” she said.
Asked about the donations, the iHeart spokesperson said the company retains “outside consultants who are registered as lobbyists both for us and their other corporate clients,” noting that those “consultants” are allowed to write personal political checks to candidates.
Those lobbyists appear to have had plenty of reasons to target Cruz specifically.
On Monday, independent investigative outlet Popular Information reported that, in the spring of 2023, Cruz sponsored a bill that would bar automakers from removing AM radios from some cars. The report noted that iHeart’s portfolio includes more than 250 AM stations.
Cruz was one of the original co-sponsors when that bill was introduced last May—two months after iHeart began making its revenue payments to Truth and Courage. In the following months, the Cruz campaign saw more than $12,000 come in from registered iHeart lobbyists, FEC records show.
In December, Cruz tried to pass the bill via unanimous consent—an effort his GOP colleague Sen. Rand Paul (R-KY) ultimately thwarted. In his floor address at the time, Cruz extolled AM radio as an “oasis for conservative speech,” invoking some influential right-wing kings of the lower frequencies to frame the bill as a battle against corporate overlords.
“Rush Limbaugh would not exist without AM radio,” Cruz said. “The views of my friend the senator from Kentucky would be heard by many fewer people without AM radio, whether Mark Levin or Sean Hannity or Glenn Beck.”
“Allowing free speech is important,” Cruz continued, claiming he believed that the automakers’ decision to phase out AM radio was an effort to censor “views that are disfavored by Big Business.”
But the legendary conservative broadcasters that Cruz cited—Limbaugh, Levin, Hannity, and Beck—all have one thing in common: at one point or another, they were all signed to iHeartMedia.
