Santos Pushed Campaign Money Abuse Past the Usual Line
There’s one immediate gratification in the details of the indictment against Representative George Santos issued on Wednesday: seeing the Department of Justice actually bring charges against a demonstrably untruthful public official for campaign finance violations. It doesn’t happen often enough in an era of widespread abuses, because so many abuses are either technically legal or occur in a gray area that seems to scare off federal law enforcement.
The scheme Mr. Santos is charged with is so flagrant, so spectacularly dumb in both conception and execution, that Justice clearly decided it had a no-brainer of a case. If Mr. Santos had structured an improper political money stream the way the grown-ups do every day, he might have gotten away with it.
The additional counts in the indictment — that Mr. Santos defrauded the unemployment insurance system, and that lied to the House about his finances — are embarrassing enough that his Republican colleagues should kick him back to Long Island, though they won’t because Speaker Kevin McCarthy needs every vote he can get these days. But the centerpiece of the indictment is a wire-fraud scheme in which Mr. Santos is accused of raising money for his campaign and then using it on a spending spree that included luxury clothing, car payments, and other items on his personal credit card.
According to the indictment, to which Mr. Santos pleaded not guilty, he told donors they could support his campaign by giving money to a tax-exempt “social welfare organization,” known by its I.R.S. designation as a 501(c)(4), which would then buy TV ads for his campaign. These so-called social welfare groups — such as Leonard Leo’s Marble Freedom or the Koch family’s Americans for Prosperity — already constitute one of the greatest abuses of the tax code and the campaign finance system, because they allow donors to give large amounts anonymously and were never supposed to be used for political purposes. But beginning with the 2010 congressional election, Karl Rove and other Republican operatives — later to be followed by Democrats — started widely using them as a way to introduce dark money into politics. The I.R.S., to its lasting discredit, allowed the practice, as long as the “primary activity” of a group wasn’t politics.
Opponents of big money in politics have long pointed out that these groups routinely break the law with impunity, because in many cases their entire reason for being is politics and they have no real social welfare purpose. They get away with it because the I.R.S. has been hobbled by Congress from investigating them, and the Federal Election Commission, which also regulates their expenditures, is regularly deadlocked.
Many 501(c)(4) groups claim a large amount of “overhead” in their spending; crucially, it’s rarely itemized and therefore escapes close scrutiny, according to Saurav Ghosh, director of federal campaign finance reform at the nonprofit Campaign Legal Center. Mr. Santos might have gotten away with a lot of dubious spending in that category without anyone knowing.
But Mr. Santos didn’t structure his fraud the usual way, according to the indictment. Instead, the government said, he set up a regular business and falsely told donors that it was a 501(c)(4). That company, which The New York Times says appears to be RedStone Strategies, had nothing to do with supporting Mr. Santos’ campaign but everything to do with supporting his bank account. He “converted most of those funds to his own personal benefit,” the indictment says, and didn’t even go through the usual procedural sham of registering the social welfare group with the I.R.S., which is not exactly difficult to check.
Nor did he use his so-called “leadership PAC” to raise money for personal expenses, which more sophisticated politicians do all the time to buy expensive clothes, luxury vacations and country club memberships.
Instead of exploiting existing political loopholes, he just took the cash with all the finesse of a Long Island pump-and-dump operation, leaving a pathetically obvious paper trail for federal investigators to follow.
“Usually, the only people who get indicted for campaign finance crimes are those who don’t have good lawyers,” said Rick Hasen, an election law expert who runs the Safeguarding Democracy Project at the U.C.L.A. School of Law. “You can do almost anything you want to do. But what Santos did is as dumb as it gets. If the government can prove this, it’s a cut and dried case.”
The government says it has emails, text messages and telephone records showing that Mr. Santos knew the company wasn’t a legitimate social welfare or political group, but told donors that it was and that the money they wired to him would be used for advertising. And it said the records show that Mr. Santos directed the contributions to be wired to his bank account. Apparently it didn’t occur to him that wire transfers can be traced, and that using them illegally is a federal offense.
As Mr. Ghosh noted, even if RedStone had been a legitimate 501(c)(4), Mr. Santos would not have been permitted to solicit money for it, since the groups are legally required to be independent of political campaigns. But the lack of federal enforcement means that candidates get away with solicitation all the time.
“The problem with nonenforcement is that it develops a culture of impunity,” Mr. Ghosh said. “You look at this indictment and it screams that this is someone who thought you could do this when you run for office.”
This time, at least, the government used its enforcement power. But only because Mr. Santos so audaciously disregarded the rules.
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