Ethics reform bill to tamp down on corruption clears first hurdle in Tennessee Senate

Legislation designed to shine more light on political actions committees and campaign finances passed its first committee in the Legislature Tuesday, a move lawmakers hope will block corruption.

The Senate State and Local Government Committee unanimously approved Senate Bill 1005, carried by Senate Speaker Pro Tem Ferrell Haile, sending it to the Senate floor for full consideration.

The House version of the bill, which is sponsored by House Speaker Cameron Sexton, was delayed until next week in the Local Government Committee to make sure it would have enough time to debate the measure. Rep. Sam Whitson, R-Franklin, is carrying the bill.

Amid an FBI investigation into shady PACs and vendors, Haile noted the groups have been able to “exploit loopholes” too long. 

“If you’re going to be a player in the process, people need to know who you are and what you’re doing,” he said.

A photo ID to register a political action committee is a key part of the legislation, and that could crack down on the illicit formation of PACs, said Haile, a Gallatin Republican.

The measure and amendments would require increased reporting for lawmakers, political action committees, some key staff members and even groups with 501c4 tax designations. Lawmakers, for instance, would be required to report all contributions and expenses.

The Legislature has been embroiled in an FBI investigation for three-plus years, part of which focuses on the formation of shady political action committees and vendors that did business with the House Republican Caucus and GOP members.

Robin Smith of Hixson resigned her House seat in March and pleaded guilty to wire fraud, admitting she and former House Speaker Glen Casada steered House Republicans to a phony vendor set up by Cade Cothren, the former chief of staff for Casada, who then gave them kickbacks. In all, House Republicans paid New Mexico-based Phoenix Solutions more than $200,000.

A former girlfriend of Cothren’s also told the Registry of Election Finance she formed the Faith Family Freedom Forum PAC at his request so he could run it without the knowledge of lawmakers after he and Casada resigned. Cothren has refused to show up and testify before the Registry board after being subpoenaed, invoking his Fifth Amendment rights against self-incrimination.

Lt. Gov. Randy McNally, the bill’s primary sponsor, issued a statement saying he is “proud” to have worked with Haile, Sexton and Whitson on legislation to “increase transparency and accountability in the realm of campaign finance.”

“While no new legislation can prevent a bad actor from being deceitful or dishonest, I believe this bill will increase openness and accountability where it is badly needed. Voters deserve to know who is pushing the messaging they receive and whose money is behind it. This bill seeks to open up the political process and ensure voters have the information they need to make informed decisions,” he said.

Three key amendments accompany the bill. One would increase the number of Registry of Election Finance membership to eight from six, with appointments from the Tennessee Advisory Committee on Open Government. The positions would be non-partisan.

A second would require copies of checks, bank statements, receipts and other financial transactions for receipts or disbursements of $1,000 to the Registry of county election commission for public inspection.

Groups with a 501(c)4 nonprofit status that engage in paid political communications within 60 days of an election would be required to register as a political action committee. The amendment also would reverse the law that allows them to raise and spend unlimited amounts of money without disclosing the sources of the money or how it’s being spent, according to Whitson.

Often, these expenses contain names or likenesses of candidates but don’t specifically advocate for support or defeat, and as long as this type of “electioneering” language isn’t included, the groups wouldn’t have to register as a PAC.

Americans for Prosperity, which holds a 504(c)4 nonprofit designation, declined to comment on the bill Tuesday.

The legislation contains a litany of new regulations, including:

• The Registry of Election Finance and Ethics Commission would not be allowed to accept a settlement for more than $25,000 in civil penalties unless the matter is handled at a regular meeting or special meeting called by the chair when at least 24 hours’ notice is given. Notice for special meetings would have to be advertised on the state’s website at least 24 hours before the meeting.
• Registry board and Ethics Commission agendas would have to be published on the website at least five days before the meeting date.
• Registry board members and immediate family members would be prohibted from lobbying, running for public office, working for the state, holding office, working in election campaigns, supporting or opposing candidates. Board members also would have a one-year “cooling off” period after serving on the Registry.
• A prohibition on PAC-to-candidate campaign contributions within 10 days of an election, known as a “PAC blackout period,” would be removed.
• State candidates and PACs that receive and spend less than $1,000 during a reporting period would not be able to file unitemized statements.
• Legislators and candidates would have to report all contributions and expenses, in addition to in-kind contributions, not just those of $100 and more, including complete information on donors. PACs would be included.
• For “interim campaign finance reports” filed after a pre-primary or pre-general within 10 days of an election, an electronic filing system may be used. Aggregate amounts of $1,000, rather than $5,000, would have to be reported for state elections in that time frame. In addition, expenditures and independent expenditures, including those by PACs, of $2,500 during those periods would have to be reported, along with the date and purpose of the payment.
• Civil penalties levied against political action committees could not be paid with funds from a political campaign committee.
• All PACs and candidates would have to keep campaign or PAC money in separate bank accounts, without commingling for personal or business use.
• To comply with audits, candidates and campaigns would have to keep copies of all checks, money orders, wire or account transfer statements, withdrawal statements, credit or debit statements, bank statements, vendor receipts and other documents from transactions involving receipts or disbursements for two years after an election.
• Anyone who pays a legislator, staff member or legislative employee for campaign services will have to file a disclosure. That means advising or assisting a candidate, working on a political campaign committee, doing paper and electronic advertising, producing mailers and fliers and distributing them.
• Failure to file a disclosure or provide false, incomplete or misleading information on a disclosure form would lead to a Class A misdemeanor, rather than Class C.
• Requirements for reporting consulting and campaign service fees would be expanded to third parties, with complete information about the group or individual.
• Members of the governor’s cabinet would be added to the list of people who can’t take fees for consulting services.
• New disclosure rules would require a litany of state officials, including members of the governor’s cabinet, who make $5,000 as a private source of income to report the identities of clients and customers. Candidates and members of the Legislature and the governor would have to report the name of any PAC they’ve established or controlled within the last five years.
• State trial court judges would be added to the list of officials who must file disclosure statements with the Tennessee Ethics Commission.
• All statements of conflicts or interest and amendments to disclosure forms filed with the Ethics Commission would be made under penalty of perjury.