By Jesse Marx
By Chris Parker
By Jake Rossen
By Jesse Marx
By Michelle LeBow
By Alleen Brown
By Maggie LaMaack
By CP Staff
On a September evening in 2009, a few dozen guests, many of them Minnesota's most elite, filed into a private party at the Radisson Plaza Hotel in downtown Minneapolis.
It was a night for expensive suits and classy business skirts. A pricy arrangement of flowers from Pazzobello decorated the banquet hall. Reception Jazz, a local three-piece ensemble, played quietly in the corner to complete the mood.
It had been a full year since the Republican National Convention left the Twin Cities, and for the evening's guests, there was reason to celebrate. The 2008 election may have been a loser for Republicans, but the convention itself was an enormous success, and many of the people at the Radisson that night had helped make it happen.
All told, the party cost more than $45,000. Funding came from tax-deductible donations paid to the 2008 Republican National Convention Host Committee. After the convention debts were paid, the committee still had more than $7 million in the piggy bank. Some of this would go toward resolving final business for the convention, but the majority was a surplus.
The RNC Host Committee continued to pay out enormous sums of money from the surplus long after the convention. Throughout 2009, the committee chief of staff expensed meals, car rentals, and flights, while receiving more than $130,000 in salary and benefits, according to Federal Election Commission records. He also drew a six-figure salary in 2010.
Other payments went to Republican operatives, political fundraisers, and former staff members of the committee.
The pattern of spending made so long after the convention is unusual, according to campaign-finance experts who reviewed the expenses at our request. Many of the payments could be in violation of FEC law, says Craig Holman, a researcher for watchdog nonprofit Public Citizen.
"There are a series of questionable—and long-term—expenses documented in the host committee reports," says Holman. "It is very surprising that people seem to still be making a profit off the convention two years later."
The RNC committee's spending is in stark contrast to the host committee for Denver's 2008 Democratic National Convention, which officially dissolved in early 2010, donating its surplus to charity. The Denver committee paid about $95,000 to staff members since the beginning of 2009—$84,000 of which went to an accountant who was tying up necessary loose ends.
Meanwhile, Minnesota's RNC host committee has paid eight times that to individuals, totaling about $760,000, according to FEC reports. The most recent salary payment of $10,000 was made to a staff member earlier this year.
"It's sort of like paying your wedding planner two years after your wedding," says Dave Levinthal, an analyst for the Center for Responsive Politics.
The financial activity might also be a violation of the law, says David Schultz, a legal professor and campaign-finance expert at Hamline University.
"It sounds more like what they're doing at this point is using a shell as a way of trying to covertly undertake some kind of political activity," Schultz says.
ONE OF THE most powerful Republicans in the country needed a lift to the airport.
It was October 2005, and Republican National Committee Chairman Ken Mehlman was wrapping up breakfast at the Downtowner in St. Paul with Gov. Tim Pawlenty. Also at the table was Tom Mason, the governor's chief of staff.
Mason offered to drive Mehlman to the airport. During the ride, Mehlman remarked on the beauty of the landscape. It was then that Mason realized he might at long last fulfill his ambition to bring the Republican National Convention to the Twin Cities.
After dropping off Mehlman, Mason knew just who to call: Jeff Larson.
Then in his mid-40s, Larson was already one of the most well-connected Republican strategists in the country. Unlike many political operatives, Larson climbed the ranks of the Republican Party almost entirely behind the curtain, successfully dodging the harsh media glare throughout his career.
"He really is a person who came up through the trenches in the Republican Party," says former Congressman Vin Weber (R-Minn.). "He started out just doing basic volunteer work and showing up at low-level functions, and he's risen to the top. I mean, he's been successful in business, successful in politics, and now he's one of the most trusted people in the Republican Party hierarchy."
If there was one man who could clinch the Twin Cities as host of the Republican National Convention, it was Larson. Hosting the convention had also been an aspiration of Larson's for decades. So when Mason called Larson to tell him the news, Larson was already working on pitching the Twin Cities as the host site.
In order to bring the convention to town, Mason and Larson would first have to prove the Twin Cities well-equipped to handle an event of such magnitude. This would mean putting political differences aside and getting support from the Democratic mayors, namely Minneapolis Mayor R.T. Rybak and St. Paul Mayor Chris Coleman.
Convincing the mayors to help wasn't a hard sell. Hosting a national political convention is good business for everyone. In 2004, the Republican National Convention earned New York hundreds of millions of dollars in revenue. A national convention also brings priceless media exposure.
A few months later, Larson helped start a committee with Tina Smith, Rybak's chief of staff. The newly formed committee put in bids to host the Republican and Democratic National Conventions.
"They really decided to make the bid not about politics, but about business," says Erin Dady, who was St. Paul's marketing director at the time.
In September 2006, the announcement rang out: St. Paul would host the Republican National Convention. On the heels of this news, it was also announced that Larson would be treasurer for the event's host committee.
"He was the guy that was instrumental in making that happen," says Mason. "He was the guy who made that happen."
On January 23, 2007, Larson officially filed the incorporation papers to head the Minneapolis-St. Paul 2008 Host Committee.
ON THE MORNING of June 6, 2007, Pawlenty hosted a breakfast at the governor's mansion in St. Paul. The governor had sent out invitations to 110 corporate CEOs, but because the meeting had been hastily thrown together on short notice, only about 25 company leaders made the trip.
The meeting was a sales pitch: It had been more than 100 years since the Twin Cities last hosted the Republican National Convention, and this was our time.
In order to help the cause, Pawlenty was relying on his guests. He expected local Fortune 500 companies to pitch in at least $1 million. From smaller businesses, he was asking half a million.
It was only a few months after Larson filed the incorporation papers, and the host committee was already struggling to raise money. Of the funds needed to host the convention, a total of $66 million would come from taxpayer dollars—$16 million from a federal earmark, and $50 million in national security and anti-terrorism expenses.
But the host committee had promised to bring in $58 million in donations. When Larson's committee banged the drum, Pawlenty helped with the heavy lifting.
By summer, all 10 spots on the host committee's board had been filled. Joining Larson on the committee were some of the biggest CEOs in the state. Among them were broadcasting magnate Stanley Hubbard, Douglas Steenland of Northwest Airlines, and Jay Fishman, CEO of Travelers Companies Inc.
When it comes to fundraising, host committees are something of a Wild West. Designed to raise and spend tens of millions of dollars in a short period of time, committees are funded through unlimited tax-deductible donations from individuals and corporations.
"The simple fact is these host committees have a lot of latitude to raise and spend money, provided that they don't cross the IRS's rules," says Paul Ryan, an expert at the nonprofit research group Campaign Legal Center. "They have a lot of latitude under federal campaign finance law to raise and spend money, pretty much however they want, as long as they're reporting it."
As Larson prepared for the convention, he also had to deal with a major PR problem. Larson's telemarketing firm was accused of making illegal robo-calls accusing Barack Obama of associating with terrorists.
An exposé also found he had rented a D.C. apartment to his close friend, Norm Coleman, and allowed Coleman to lapse on rent payments. When Larson was interviewed about his rent arrangement with Coleman in April 2008, Larson's work as CEO of the host committee came up. At the time, he explained he was working full-time on the committee for free.
It later came out that during this time Larson had spent hundreds of thousands of dollars on clothes for Sarah Palin's family at high-end retail stores. Larson was later reimbursed by the RNC for the expenses.
By the time of the convention, Larson had managed to pry open the wallets. Between Pawlenty, Larson, and a team of well-paid private fundraisers, the committee landed huge donations from some of the biggest corporations in the state, including $3 million from Target Corp., $2.9 million from Qwest, and $2.2 million from Best Buy.
In total, Larson's committee raised $65 million—$7 million more than its goal.
The last night of the Republican National Convention, presidential nominee John McCain addressed a crowd of more than 20,000 in the Xcel Energy Center. After a speech that lasted nearly an hour, McCain ended with one last call to action.
"Stand up! Stand up and fight!" he bellowed as the crowd erupted in booming applause. "We never hide from history! We make history! Thank you, and God bless you, and God bless America!"
Cue John Rich's country song "Raisin' McCain" and thousands of red, white, and blue balloons falling from the sky.
Larson had pulled it off. The convention was over, and despite some scuffles between police and protestors, the event was widely regarded as a huge success.
But for Larson and his host committee, the work wasn't quite finished. Hundreds of thousands of dollars in bills still needed to be settled. There was an internal audit to finish, and preparation for the extensive audit by the FEC.
Meanwhile in Denver, the host committee for the Democratic National Convention was in the same position.
"We still had some money to distribute from our host committee, and some logistics to close out," says Mike Dino, CEO of the Denver committee. "There's a lot to do after it's over immediately. It begins to certainly scale back."
In early 2009, Dino continued to perform about 10 hours of work a week related to the committee, he says, though he was no longer being paid a salary. Most of the work at this point was done by the committee's accountant, who prepared for the FEC audit.
The committee's plan was to settle all debts and close out as soon as possible, says Dino. "We wanted to have everything pretty much closed out in 2009."
But Larson and his committee would take a different path.
ON July 21, 2009, the RNC committee held a private meeting. Over coffee, they discussed which charities to support with its surplus.
"We ended up with money left over at the end," says committee chairman Douglas Leatherdale. "And that had to go to another charitable organization, not to the political party or any individuals."
It was agreed that the money would be donated to the Minneapolis Foundation, the St. Paul Foundation, and the Minnesota Foundation.
The other item on the day's agenda was Jeff Larson's compensation. Larson briefly stepped out of the room while the board discussed how much he would be paid. By the time he came back in, the board had voted unanimously to award him $400,000.
This would be the last time the committee would meet in person. From here on, complete control of the finances would be handed to Larson.
A couple of other obstacles prevented a speedy termination for the committee. For one, it was being sued by 3 Dog Consulting, which claimed it was still owed money for convention fundraising work.
The committee was also still preparing for the FEC audit, a thorough review of fundraising and spending. But the audit only looked at spending through December 31, 2008. Beyond that date, Larson's committee racked up large expenses that benefitted companies and individuals close to Larson, according to FEC records.
No one did better than Mike Vallante. Larson's chief of staff on the committee, Vallante received regular salary disbursements of $10,000 from the committee throughout 2009. He also expensed car rental, gas, meals, flights, and other unexplained reimbursements. Combined, Vallante's salary and benefits for that year totaled more than $130,000.
While Vallante pocketed the most money, he was not alone in receiving pay long after the convention, according to FEC records. Joining him was Matt Burns, another staff member of the committee. Burns received $7,500 in June 2009 for consulting. Compelem Strategies, a communications firm he started that month, received another $6,500.
Burns initially declined to comment, but later sent an emailed response.
"My work involved helping the host committee with post-convention survey activities (measuring economic impact of hosting the convention, etc.)," wrote Burns. "My fee for this work was entirely consistent with industry standards and what other clients were charged for similar projects."
Kiersten Schroeder, a committee staff member, was also paid for organizing a thank-you event on the one-year anniversary of the convention at the Radisson. She personally received a $7,500 consulting fee for planning the party. Out of the committee's bank account, the party ran up $25,000 on food and drinks. Another $11,000 went to an ad agency for costs related to the party. (Schroeder did not respond to requests for an interview.)
Another beneficiary is Dan Puhl, founder of Cardinals FEC Compliance, a local accounting firm that specializes in campaign accounting. According to IRS documents, Puhl did the committee's 2009 taxes for free, which the committee listed as an $79,865 in-kind donation. But Puhl has since received more than $13,000 for accounting and tax consulting.
Puhl's firm has also enjoyed the rewards: Cardinals has been paid more than $116,000 since the beginning of 2009 to compile the committee's quarterly reports.
Puhl says he does his business in private, and would offer neither comment nor explanation for how he made so much money long after the RNC left town.
Another series of expenditures went to political operatives, including a couple of Larson's old friends. Thomas McGill and Richard Nelson, who have worked as fundraisers for Norm Coleman's Northstar Leadership PAC—which Larson founded, and has managed since 2003—were paid a combined $40,500 for "donor relations."
In March 2010, the committee paid another $25,000 to Laura Van Hove, founder of LVH Consulting, also for donor analysis. According to LVH's website, its mission is "to aid principled Republican candidates in their campaigns by helping them reach their full national fundraising potential."
Both McGill and Van Hove declined to comment on the record about their work for the committee.
Nearly $40,000 of the committee's money also found its way back to Larson's firm, FLS. Throughout 2009 and 2010, FLS charged the committee for administrative fees, telephone and IT service, and rent. The last payment of $1,800, filed September 29, 2010, was described as "IT and Rent for June."
John Knapp, an attorney with local firm Winthrop and Weinstine, represented the committee in its lawsuit and dealings with the FEC. He says the first half of 2010 was spent waiting for the FEC's audit, which was finished and published in the third week in June.
"You look back in the past year, and we really haven't done much of anything except for wait for the FEC," Knapp says.
During the wait, Vallante continued to cash checks. Though his reimbursements dropped off, Vallante continued collecting a salary during 2010. He pocketed a combined $106,000—of which $32,000 came in payments on June 22, 29, and 30, in the days immediately before and after the FEC audit was finalized.
Vallante could not remember exactly what work he was doing during this profitable period, though he believes it was related to terminating the committee.
"As best as I can recall, we were thinking that at that point we were actually going to close up shop by the early summer," Vallante says.
Vallante received his last $10,000 payment of 2010 on October 1, exactly 25 months after the beginning of the RNC Convention.
Leatherdale, the board chairman, recalls Vallante as a "very talented guy, and very experienced," but says he was unaware Vallante continued to draw a salary. Also unaware was Cynthia Lesher, the committee president, who says she'd been in contact with Larson as recently as a couple of months ago.
"No, I'm not aware that Mike Vallante is still on the payroll," she says.
But Vallante says he was not the only one still active in the host committee. He says all the financial decisions have gone through Larson.
"Everything is run by Jeff," Vallante says. "He did not have his hands in everything, but certainly, I made sure everything gets run by him."
THE COMMITTEE'S ACTIVITY since the RNC suggests a pattern of improper and possibly illegal spending, says Hamline's David Schultz.
When these political committees register with the FEC, they agree to limit spending to purposes related to the committee's mission. Many of the host committee's expenditures raise red flags in this regard, says Schultz.
"If the committee was set up specifically to provide host services for the 2008 Republican Convention, if it is now spending money and it's unrelated to that purpose, it's probably violating FEC laws, because it's not spending money appropriate for what it was set up to do," Schultz says.
But the expenditure reports to the FEC don't tell the whole story. The rules dictating what the committee must report are incredibly lax, so the records often contain very few details, says Bill Allison, editorial director for the Sunlight Foundation, a nonpartisan government watchdog group.
"There's just a lack of transparency in all FEC disclosures about what campaigns are spending their money on," says Allison. "So we see the staffers who are expensing meals, car rental, airfare, and so on, and drawing salaries through October. I mean, exactly what they're doing for the committee is somewhat questionable."
Aside from the employees who were paid out long after the convention left town, the payments to political fundraising consultants are also potential violations, says Lloyd Mayer, a law professor at the University of Notre Dame who specializes in nonprofit tax law.
Mayer says that the very fact Vanhove, Nelson, and McGill—career fundraisers for Republican candidates—were paid for donor analysis is enough to raise suspicion, and leaves open the possibility of IRS violations.
"The question is, what's the analysis going to be used for, and more importantly, who's going to have access to that list?" Mayer says. "The IRS rulings are clear that if you're a charity, you have a donor list, or you have information about your donor list, and then you give that to a political candidate or a political party for their use...that's going to cross the line."
Craig Holman of Public Citizen also says the committee's spending pattern long after the convention is very abnormal, and deserves explanation.
"The answers to these questions must come from those receiving the payments," Holman says.
THERE'S REALLY ONLY one man in a good position to explain away the questionable spending, and that's Jeff Larson.
After weeks of interview requests, Larson sent an email agreeing to answer our questions via email.
In his response, Larson explains that he took the position with the host committee because he saw an opportunity to help put the Twin Cities in the national spotlight.
"I believed the Twin Cities needed a shot in the arm," he wrote. "It had been a long time since Minneapolis-St. Paul had hosted anything nearly as large as the National Convention. You would have to go back to the Super Bowl in 1991 since we were on the national stage."
In terms of the committee's continued existence, Larson blames the FEC, though he wasn't more specific as to why.
His telemarketing firm received payments from the committee after the convention because people who use the office and its equipment were still tying up loose ends, Larson explained. This includes filing final reports and transferring the files to digital formats, which can be viewed by future convention host committees. FLS also stores files related to the committee.
Larson did not respond to our questions about specific payments to various employees after the convention, but offered a lengthy list of ways in which the committee went above and beyond its calling, including planning a thank-you party for volunteers and donating $6 million to charity.
"It was my job to ensure that all the work we did running up to and after the convention would not be lost because we closed our doors before we were allowed to do so," he says. "Despite that frustration with the FEC delays, we were still able to fulfill our mission and help the community."
When asked to clarify a few more details, Larson declined. "I have spent far too much time on your request already," he says.
"Bottom line is the host committee raised private dollars to put on the convention," says Larson. "No public dollars were used. We raised dollars to relieve taxpayers of paying for services including promoting the Minneapolis-St. Paul area. We had a great convention from all accounts."
Vallante, the committee's chief of staff, also blames the FEC for not allowing the committee to close out.
"We had hoped, literally, in 2009 we'd be able to close the thing out," Vallante says. "We repeatedly asked them, 'Can we close? Can we close?'"
Asked why the committee's terminations were rejected, Vallante laughs. "I wish I knew," he says.
FEC spokesperson Julia Queen says the answer is simple: The reason the committee was not able to close out is because it continued to have an active account by paying people like Vallante.
"They must be doing something to show that some activity is going on," Queen says. "Because [FEC regulations] say that once they have ceased activity, then they can file a final report."
John Knapp, the committee's lawyer, contends it was not allowed to terminate because FEC commissioners had wanted to take a closer look at the official audit, which found almost $3 million in unreported donations. Queen, the FEC spokeswoman, could not confirm this.
On February 3, Larson received a huge promotion. He was named chief of staff for RNC chair Reince Preibus. In hiring Larson, the RNC counted his work with the host committee as one of his qualifications.
The day he was hired to his new job, Larson transferred control of the RNC committee to Sheila Berkeley. Berkeley is an employee of FLS, which Larson left in November. She has not responded to numerous requests for an interview.
In terms of the committee's spending, the law is complicated. It would take a full investigation to determine whether the years of continued payments crossed the line, says Schultz.
"The FEC is just backlogged and unable to get to all the problems, and that may be what's going on here," he says. "It also could be that they're doing just a really good job in terms of hiding what they're doing."
Postscript: On March 10, as this story was going to press, Berkeley filed termination papers for the host committee. The filing documents show how the remainder of the surplus was disbursed.
As planned, the bulk went to charity: About $1.2 million was paid to the Minneapolis Foundation, another $1.2 million to the St. Paul Foundation, and $590,000 to the Minnesota Community Foundation.
But not all of the money paid out this year went to nonprofits.
On February 15, Mike Vallante got one last salary payment of $10,000 for "Management Consulting."
On February 21, the committee's funds reimbursed Vallante $100 for food and another $1,404 that is unexplained. That same day, the committee paid a combined $1,200 in reimbursements for a rental car, airfare, and hotel room, though the records don't name the recipient.
In an interview the day after the reimbursements were filed, Vallante explained how aggravated he was that the FEC didn't allow the committee to close.
"We all knew there was going to be clean-up work to take place afterwards," said Vallante. "There was gonna be paperwork, legal work. And it kind of—not kind of, it just dragged on."