Election watchdog disputes Harwell claim that shifting state funds to federal campaign was legit

Former Tennessee House Speaker Beth Harwell contends the transfer of money from her state political action committee to a super PAC that supported her failed congressional bid this summer was legal.

But a federal watchdog group that monitors potential campaign finance violations says Harwell’s actions are “outside the law,” which prohibits state election funds from being used for federal campaigns.

“In the case of Harwell, I think we would be looking at a violation, but not a tremendously huge violation, because we’re talking about $35,000,” said Saurav Ghosh, director of federal campaign finance reform for Washington, D.C.-based Campaign Legal Center.

The law was designed to stop the transfer of millions of dollars in state campaign funds to federal campaigns, Ghosh said. Nevertheless, he said his organization will consider filing a complaint with the Federal Election Commission against the Harwell campaign.

Harwell claims the use of the funds was vetted by attorneys working for her campaign.

“I don’t know the ins and outs. I was busy being the candidate,” Harwell told the Tennessee Lookout. “But I had a legal staff and an accountant working on everything, so we did everything above board. We did not violate any rules. That I can assure you.”

Harwell PAC, the state political action committee for the Belle Meade Republican, disbursed $12,000 on July 22 to Government of the People, an organization formed by co-treasurer Debra Maggart, a Capitol Hill lobbyist and former House Republican leader, that made independent expenditures supporting Harwell’s campaign for the 5th Congressional District race.

Government of the People raised a total of $123,250 in the waning days of the Republican primary when Harwell was defeated by former Maury County Mayor Andy Ogles, including $35,000 from the Beth Harwell Committee and $10,000 from her husband, Samuel Harwell, totals first reported by the Tennessee Journal. It’s not clear whether that committee has a federal or state designation, though the Campaign Legal Center says it is likely Harwell’s state election committee. 

The super PAC, which purchased TV ads supporting Harwell in her race against Ogles, also received $5,000 each from John Ingram and Orrin Ingram, $5,000 from Mark Cate, a principal with Stones River Group, $10,000 from former Gov. Bill Haslam and $20,000 from Joey Jacobs, former CEO of Acadia Healthcare Co.

The super PAC spent $118,219 and had $5,030 remaining at the end of the primary, according to an updated Federal Election Commission report. The group also reported spending $5,000 with Frost Brown Todd law firm.

Ghosh reviewed reports for Government of the People and said the Beth Harwell Committee is likely her state campaign arm. Harwell’s federal campaign is called Harwell for Congress.

A former enforcement attorney for the Federal Election Commission, Ghosh confirmed that state campaign accounts cannot be used in a federal election, nor can the money be transferred to a super PAC for spending on a race.

Federal campaign finance laws prohibit any federal candidate from transferring or directing more than $5,000 from their state account to be used to influence a federal election, Ghosh said.

“Just because it’s a super PAC doesn’t mean it operates outside of any laws. There’s a lot less restrictions on what super PACs can do, but what it looks like here with Harwell giving a super PAC $35,000 from her state campaign and another $12,000 from her state PAC, that to me looks like a pretty clear violation of federal campaign finance law,” Ghosh said.

In considering whether to file a complaint against Harwell, the organization will have to determine whether the FEC will look into the matter and enforce the law, he said. He noted the FEC is not aggressive with enforcement.

The Campaign Legal Center previously filed a complaint with the FEC against the campaign of state Sen. Brian Kelsey, who is facing a Jan. 23 trial on a federal five-count indictment alleging he violated campaign finance laws by funneling more than $90,000 from his state account through two political action committees to a national political group, the American Conservative Union. It bought TV and digital advertising backing his failed 2016 congressional campaign, according to the indictment. 

Kelsey’s co-defendant, Joshua Smith, owner of The Standard, a Nashville restaurant and club that catered to Republican politicians, pleaded guilty last week to shifting $67,000 in the scheme. Sentencing is set for June 2023.

Despite similarities, Harwell said she believes the transfer of funds was “absolutely” OK, noting her campaign had an attorney and accountant in charge of everything.

“I personally didn’t make those decisions. Again, I was busy being the candidate. Albeit unsuccessful, I was busy being a candidate. I have full faith in that we did everything correctly,” she reiterated.

Ghosh pointed out the Kelsey case and Harwell’s situation are different in that the state senator’s alleged violation involved “a little more subterfuge,” by using the American Conservative Union, a large “dark money group” that supports conservative candidates. 

“Their role in taking the money and obscuring where it came from effectively and spending it on ads to back Kelsey, that violated a different aspect of federal law,” Ghosh said.

Harwell’s campaign appears to have broken the “soft money” prohibition for funds that aren’t regulated based on the 2003 McCain-Feingold Campaign Reform Act, Ghosh said. It prohibits several sorts of “soft money” from being used in federal elections, including funds raised by a state campaign or a state political action committee beyond the limited amount permitted.

Ogles, who benefited from $2.2 million in super PAC advertising during the Republican primary, had a complaint filed against him in the second reporting period for filing late.

His campaign manager at the time, Nashville auto magnate Lee Beaman, also formed Volunteers for Freedom PAC and donated $50,000 for a $24,000 ad buy backing Ogles. The move is potentially a violation of federal campaign finance law because of coordination between the super PAC and Ogles’ campaign manager.