Democracy South calls for Investigation of Possible Money Laundering of Corporate Campaign Contributions
June 2, 1997
Democracy South today held a news conference in front of the State Board of Elections in which they announced that the organization is filing a formal complaint with the Board asking for an investigation of possibly illegal money laundering of corporate contributions to state political campaigns.
North Carolina law bans direct or indirect corporate contributions to North Carolina campaigns or political committees. However, recent newspaper reports describe in detail how the national political parties sent large amounts of money to North Carolina political committees after receiving similar amounts from North Carolina corporations.
Democracy South also requested an investigation of possibly illegal use of corporate money or resources to support North Carolina candidates. It has called the Board’s attention to possible use of corporate resources to solicit, transmit, and/or reimburse employee contributions.
The text of the Complaint, in its entirety, follows below:
BEFORE THE NORTH CAROLINA STATE BOARD OF ELECTIONS: WAKE COUNTY
IN THE MATTER OF CERTAIN CAMPAIGN CONTRIBUTIONS
DEMOCRACY SOUTH, INC., a North Carolina non-profit corporation, and PETER MACDOWELL, Individually and as Executive Director of Democracy South, Inc., Petitioners.
Democracy South, Inc. and Peter MacDowell respectfully petition the State Board of Elections to investigate, pursuant to its statutory powers, including but not limited to G.S. 163-278.22, certain campaign contributions as set forth below. In support of this petition, the Petitioners show:
1. Democracy South, Inc. is a non-profit corporation organized under the laws of North Carolina located in Chapel Hill, North Carolina that researches various matters of public policy affecting the citizens of North Carolina.
2. Peter MacDowell is Executive Director of Democracy South, Inc. and resides in Chapel Hill, North Carolina. He is registered to vote with the Orange County Board of Elections.
3. N.C.G.S. 163-278.19 states, in pertinent part, it “shall be unlawful for any corporation, business entity, labor union, professional association or insurance company directly or indirectly (1) to make any [campaign] contribution or expenditure. . . ; (2) to pay or use or offer, consent or agree to pay or use any of its money or property for or in aid of or in opposition to any candidate or political committee; (3) to reimburse or indemnify any person or individual for money or property so used…. N.C.Q.S. 163-269 states ‘It shall be unlawful for any corporation doing business in this State, either domestic or foreign charter, directly or indirectly to make any contribution or expenditure in aid or in behalf of any candidate or campaign committee in any primary or election held in this State, or for any political purpose whatsoever, or for the reimbursement or indemnification of any person for money or property so used, or for any contribution or expenditure so made; or for any officer, director, stockholder, attorney or agent of any corporation to aid, abet, advise, or consent to any such contribution or expenditure; or for any person to solicit or knowingly receive any such contribution or expenditure.”
4. Petitioners allege that sufficient evidence exists to warrant a comprehensive investigation of possible violations of these provisions and others, which, among other things, prohibit a corporation from giving money for the purpose of helping a candidate in a state election or giving any agent money or material aid to make a campaign contribution; prohibit an individual from using a corporation’s money for the purpose of making a political donation or otherwise attempting to influence an election; and, prohibit a candidate from knowingly accepting money directly or indirectly from a corporation.
5. Petitioners seek an investigation to determine whether corporate money is being illegally funneled or laundered in the North Carolina elections to influence their outcome. The factual bases for this request follows:
(a) On June 1, 1997, The Charlotte Observer, a daily newspaper of general circulation in North Carolina, reported that national political parties sent large amounts of money to North Carolina political committees after receiving similar amounts in direct corporate donations from North Carolina corporations. In that report, North Carolina Attorney General Mike Easley was quoted as stating: “Average folks would see it as clear [money] laundering. . . you’re sending the money up to be switched or laundered to money that can be received.” The Charlotte Observer article is attached and incorporated herein as Exhibit A.
Specifically, the newspaper reported that the campaign of Robin Hayes, the Republican 1996 candidate for governor, asked that First Union National Bank of North Carolina and Snyder Packaging of Concord, North Carolina make contributions to the Republic National Committee and that such donations, totaling $111,000.00, were given to the Republican National Committee on October 4, 1996. On October 21, 1996, Mr. Hayes donated $100,000.00 to the Republican National Committee. On October 23, 1996, the Republican National Committee gave the North Carolina Republican Party $213,450.00. On that same date, the North Carolina Republican Party gave Mr. Hayes’ campaign $213,450.00.
(b) On April 27, 1997, The News & Observer of Raleigh, North Carolina published an article which also details corporate donations to political committees and candidates. A copy of that article is attached and incorporated by reference as Exhibit B.
(c) Reports filed with the Federal Election Commission show that two companies based in Asheboro, North Carolina, and controlled by a German citizen, Hans Klaussner, made corporate contributions of $50,000 each to the Republican National Committee. The companies are Klaussner Furniture and its affiliate, Technimark, which together are the largest private employer in Randolph County, the home of House Speaker Harold Brubaker. According to The Charlotte Observer’s June 1, 1997 article, Speaker Brubaker says he talked with Klaussner Furniture chief executive officer J.B. Davis about financially helping Republican candidates in campaigns for the North Carolina House of Representatives. The financial report for the Randolph County (North Carolina) Republican Party shows that it received two donations totaling $118,667 from the Republican National Committee in September, 1996, a few weeks after August 23, the date the $100,000 arrived at the Republican National Committee from Klaussner Furniture and Technimark.
6. On information and belief, Petitioners allege that some corporations and other business entities, instead of establishing Political Action Committees for agents, officers and employees of the business entity, as authorized under N.C.G.S. 163-278.19, have solicited campaign contributions from agents, officers and employees and ‘bundled” those contributions for delivery in a single, grouped donation to candidates. Such activity by a business entity is a violation of N.C.G.S. 163-278.19 which prohibits direct or indirect corporate contributions or the use of corporate resources to influence a North Carolina election. This statute provides specific exceptions designed to facilitate the activity of political action committees (“PACs”) composed of employees of a business entity, labor union, etc. It also provides a specific exception for use of telephone and office space “in the normal and usual scope of’ employment for an employee who is a candidate or treasurer of a political committee. State law also requires that two or more unrelated people who coordinate their action to make political donations or influence the outcome of an election must form a political committee, register, and file the appropriate financial disclosure report. N.C.Q.S. 163-278.12 and N.C.G.S. 163-278.6. The factual basis for this allegation follows:
(a)( 1) According to the campaign finance reports of State Sen. Beverly Perdue (D- Craven), her campaign received three checks on March 5, 1996, and four checks on October 28, 1996 from donors with addresses listed in Kernersville, N.C., a city located more than 100 miles from Sen. Perdue’s district.
(a)(2) Research by Democracy South staff reveals that four of the seven addresses given for Kernersville do not exist. Spokespersons for the Kernersville Police Department, U.S. Post Office, county planning department, and emergency management personnel say no such streets exist in the Kernersville area. The following shows contributions on the two Perdue reports covering these dates.
All the donors of the above-referenced political contributions are associates of the Pierce Management Group in Kernersville, which is headed by A. Steve Pierce. Mr. Pierce made donations to the Perdue campaign on the two dates in question, April 5 and October 10, 1996 and gave the company’s Kernersville box number as his address. On each day, his check was logged with other checks from Pierce company associates who do not live in Kernersville or work out of the main company office, but whose check was typed in at the Perdue campaign with Kernersville as the city of their origin. It appears that all four of the bogus Kernersville streets exist in New Bern, North Carolina which lies within Senator Perdue’s district. One address is the street number for the Pierce rest home that donor James Holt manages in New Bern. Another street number is for a home listed to donor Brian Smith, currently a manager for a restaurant owned by A. Steve Pierce. William Hammond, who is Mr. Pierce’s son-in-law and the company’s Medicaid billing director, lives in Kernersville, but is listed on Trent Road, which is in New Bern.
(a)(3) The pattern of multiple checks arriving on the same day from Pierce family and employees is not unique to the Perdue campaign; however, the attributions of these checks all to Kernersville raises the question of whether the “bundling” of checks, including their possible solicitation and/or possible reimbursement by company officials, was done with corporate resources in violation of the law. James Holt, when interviewed on May 30, 1997 about his $4,000 contribution made on October 28, seemed somewhat confused about its details, even though it was his only state political donation in the past several years. He said it was made in “the early part of 1997,” and “was something like” $2,000, and was mailed from his home in New Bern, not from the rest home or company headquarters. See, Exhibit C, attached and incorporated herein.
(a)(4) The circumstances surrounding the delivery of the Pierce related political contributions suggest that they were received at Pierce headquarters in Kernersville and then bundled and mailed in one envelope or, minimally, a coordinated mailing occurred so that all seven donations would arrive together. These circumstances suggest that company resources and/or company personnel were involved in this activity, with the employees of Pierce Management Group acting essentially as a Political Action Committee, with company administrative support, without registering as required by law.
Did company personnel solicit, reimburse, compensate, or otherwise engage employees in campaign contribution activity using company resources? Such activity, if it occurs, avoids the registration and disclosure requirements of a PAC, masks the source of donations, skirts the contribution limits imposed on PACs, and uses corporate resources, possibly illegally, to funnel money into North Carolina elections. In some cases, the amount of resources may be quite small, but in others, with dozens of employees involved, the resources may be significant.
(b) Two additional situations for which an investigation is requested are:
(b)(1) Guilford Mills is a textile company located in Greensboro, North Carolina. Attached and incorporated by reference as Exhibit D is a list of campaign contributors who, on information and belief, were Guilford employees at the time of their contribution (some have since left employment), or are related to company employees, particularly Guilford Mills’ chief executive officer and chairman, Charles A. “Chuck” Hayes. The attached list has at least fifty (50) different names of Guilford employees or family members, with total contributions made directly to political candidates or PACs of $200,000.00. (Contributions to local, state or federal party committees are not included in this total.) The list includes numerous examples of multiple checks arriving at a campaign on the same day from employees in different cities, in states as far away as New York and Florida. Some of them occurred in the final days of the 1996 campaign, after the candidates’ pre-election disclosure reports were filed. In an April 5, 1993 article, The News & Observer quoted Douglas Galyon, public affairs director for Guilford Mills as acknowledging that he bundled contribution checks and sent them to candidates, but he noted that executives were under no pressure to contribute. See, Exhibit E, attached and incorporated herein.
The newspaper published: “The associates of Guilford are very dedicated to Chuck [Hayes] personally and corporately,” said Galyon, whom [Jim] Hunt has appointed to the state Transportation Board. “Chuck has great charisma and magnetism. We all tend to contribute. And that goes beyond political campaigns and so forth — be it the Cancer Society or whatever cause Chuck is backing.”
(b)(2) Yvonne Tilley and her college age daughter [Dxxxxa] Tilley made four contributions totaling $12,000 in 1996 and neither shows up as having given any donation above $100 in the State Board of Elections’ 1989-95 database. Yvonne Tilley, is the assistant to William J. Armfield IV. Mr. Armfield is affiliated with the Unifi textile company in Greensboro, North Carolina, is chair of the UNC- Chapel Hill Board of Trustees, and now manages his personal investment firm, Spotswood Capital, in Greensboro. In an interview, Ms. Tilley said she is Mr. Armfield’s assistant “in every sense of the word,” is well paid and is not simply a secretary, “runs the business” of Spotswood Capital, and sends out or otherwise handles Mr. Armfield’s campaign donations, which with his wife Jane, totaled more than $40,000.00 in 1995-96. William and Jane Armfield gave $4,000 each to Senate President Pro Tem Marc Basnight (D-Dare) and $4,000 each to House Speaker Harold Brubaker (R-Randolph).
(c) The contributions listed by recipients as coming from Ms. Tilley and her daughter are as follows:
(d) In the May 29, 1997 interview a Democracy South staff member asked Yvonne Tilley about what contributions she had made. She stated that she made only one sizable contribution: a $2,000 donation to Harold Brubaker, which she said she sent to the Republican headquarters with a letter which she said directed the money to be used for the “expenses of his campaign.” She said the money was hers and that her daughter had not made a donation, but later in the conversation said her daughter had her own checking account and “I have no idea what’s she done.”
(e) When told her recollection didn’t reflect statements made in public campaign reports filed with the Campaign Reporting Office of the North Carolina Board of Elections, Ms. Tilley paused to check a computer in her Spotswood Capital office and returned to the phone with the report that she had given $4,000 to the Brubaker campaign and $2,000 to state Sen. Marc Basnight’s campaign. These are the same amounts her daughter gave. Ms. Tilley further stated that her records showed that she mailed the Basnight donation in October 1996 and the Brubaker donation on September 12, 1996. The Brubaker campaign reports show no contribution received from Yvonne Tilley; however, the N.C Republican House Committee does show a $4,000 contribution received from her on August 14, 1996– not the September date she stated. (That is about the same time the Brubaker campaign received a $4,000 contribution from Tilley’s daughter [Dxxxxa] Tilley.)
Respectfully submitted, this 2nd day of June, 1997.
Peter MacDowell, Individually and on behalf of Democracy South, Inc., a North Carolina non-profit corporation.
605-A NC 54 West
Chapel Hill, North Carolina 27516