FOR IMMEDIATE RELEASE
August 19, 2014
Contact: Allison Moore 502-618-1372
LOUISVILLE – Team Mitch today released the following statement and background information on Alison Lundergan Grimes potentially accepting illegal gifts and services from her family’s corporate interests.
“The revelation that Alison Lundergan Grimes has potentially accepted large, illegal gifts and services from her father, Jerry Lundergan’s corporate interests is shocking and should set off warning bells for all Kentuckians concerned about ethics in public office. Alison has a lot of tough questions to answer about how her family, and their corporate interests, have improperly subsidized her political operation,” said Team Mitch campaign manager Jesse Benton.
The Grimes family discount
By Manu Raju
8/18/14 9:01 PM EDT
Alison Lundergan Grimes has barnstormed Kentucky in her 45-foot-long campaign bus, rolling up to raucous campaign events and posing for photos next to the vehicle bearing an oversize image of the Democratic Senate hopeful.
Left unmentioned amid the hubbub is this: Her father’s company acquired the bus just as the campaign got under way last year — and is renting it to his daughter for a fraction of what other companies would typically charge, according to a POLITICO analysis. Federal campaign finance law bars a campaign from receiving goods and services below the fair market value from a corporation, regardless of whether it is owned by a family member.
A review of Federal Election Commission records shows Grimes paid less than $11,000 through June to rent the bus for at least 24 days, amounting to about $456 per day. Officials at four bus companies said they typically charge $1,500 to $2,000 a day to rent a similarly sized bus, and Senate Minority Leader Mitch McConnell’s campaign said it spent at least $2,200 per day to rent essentially the same bus during a swing earlier this month. That would amount to a savings of tens of thousands of dollars for the Democrat’s campaign.
The spending highlights the central role that Jerry Lundergan, a gregarious former Kentucky Democratic Party chairman and state lawmaker, is playing in his daughter’s bid to unseat McConnell. Polls show the GOP leader maintaining a very small lead in the race, one of the most closely watched in the country this year.
The difference between what the company is charging her campaign and the fair market value of the bus rental could be considered an illegal in-kind contribution, according to legal experts.
“If it’s coming from a corporation, it’s illegal,” said Larry Noble, former general counsel of the Federal Election Commission for 13 years who now works at the Campaign Legal Center, a watchdog group. Corporations are prohibited from donating cash or gifts to a campaign, while individual donors’ limits cannot exceed $5,200 per election cycle.
Lundergan, Noble added, “can volunteer himself to the campaign, but what he can’t do is volunteer his company.”
The Grimes campaign disputes that it is paying less than the fair market value for the bus, saying it went above and beyond to ensure that its payments reflect comparable prices of other similar vehicles.
“The campaign has reported its payments to the bus on the public record,” said Marc Elias, Grimes’ campaign lawyer. “Moreover, the law requires that the campaign pay ‘the normal and usual fare for rental charge for comparable commercial conveyance of sufficient size to accommodate all campaign travelers.’”
Elias added: “In determining the appropriate rate, the campaign obtained costs of comparable providers in the Kentucky and regional market and arrived at a reasonable reimbursement cost. We have reviewed the campaign’s methodology and agree that it applies with the applicable rules.”
The campaign declined to provide those estimates of comparable prices.
If the FEC were to take up the matter and find the Grimes campaign at fault, the agency could ultimately force the Democrat to pay a civil penalty for accepting an illegal corporate contribution and failing to report an in-kind donation.
Altogether, the campaign has paid Lundergan’s catering and events companies about $35,000 for everything from prop rentals to fuel costs. It’s trickier to gauge fair market value for some of the other outlays, though it’s unclear why Grimes’ primary night party, for instance, was substantially cheaper than McConnell’s.
Over the course of the campaign, Lundergan’s companies have helped stage and organize several major campaign appearances, including her flashy July 2013 campaign kickoff, the rollout of her jobs plan in eastern Kentucky in January, her May primary night victory party and Bill Clinton’s speech in Lexington earlier this month.
Several of these events have taken place at the Carrick House, a classy Lexington mansion and banquet hall owned by his company. Campaign finance reports show that Lundy’s Special Events, one of Lundergan’s companies, was paid $3,706 for its kickoff event at the Carrick House in July 2013.
After she skated to her primary night victory party, Grimes threw a soiree at the Carrick House, paying Lundy’s $2,882 for its services that night. Additional production-related costs to other vendors put the final tab at $7,466 for the primary night party, FEC records show.
In contrast, McConnell’s primary night victory party, which was hosted by the Jefferson County Republican Party at a Marriott hotel in Louisville, cost $22,550, according to invoices provided by the campaign. Both the Grimes and McConnell campaigns offered a cash bar to their guests.
The Grimes campaign said its costs were consistent with market value.
The Carrick House also hosted a Grimes money event last September. When asked about the costs for renting the banquet hall for the fundraiser, campaign officials acknowledged that it failed to disclose a three-hour room rental as a $500 in-kind contribution from the donor, saying they would amend their reports to show the donation.
The Grimes campaign has paid at least $67,000 for goods and services provided by her relatives or companies associated with her family members. The campaign rents office space from Grimes’ mother, Charlotte, according to spending reports. And it has paid a company that employs the candidate’s husband, Andrew Grimes, for office supplies. The expenses are a small fraction of the $5.2 million spent by the campaign through June.
Lundergan, 67, has been an influential adviser on campaign tactics, connecting his 35-year-old daughter to big-ticket donors and leveraging his political relationships — including with the Clintons, his longtime friends — to boost the campaign.
The hard-charging Lundergan became friends with Bill Clinton when he was governor of Arkansas and helped his two successful campaigns in Kentucky. He also chaired Hillary Clinton’s 2008 primary campaign in the Bluegrass State.
But Lundergan has liabilities, too. After becoming party chairman, he was convicted of a felony in 1989 for accepting a no-bid contract for catering an event in violation of a state law prohibiting such action by legislators, prompting him to resign his political positions. The conviction was later overturned when a court ruled that his action should have been classified as a misdemeanor, and he was not further prosecuted.
As Democrats have criticized McConnell’s wife, Elaine Chao, for serving on the board of Bloomberg Philanthropies, which is spending $50 million on a campaign to gut the coal industry, the Republican leader has pointed the finger back at Lundergan.
“Honestly, if they want to start talking about family members, if my dad was Jerry Lundergan, I think I’d think twice about that,” McConnell told reporters last week in Greenville, Ky.
Since his ethics controversy, Lundergan has revitalized his political career. He’s also built up his catering business, which got its start selling hot dogs at football games and county fairs, into a lucrative special events company. At his daughter’s campaign events, trucks with the name “Lundy’s” are often present.
Lundergan has several companies under the parent company SR Holdings Inc., including Signature Special Event Services, which owns the campaign bus. According to a copy of the vehicle’s registration obtained by POLITICO, the title of the car was transferred to Signature Special Events on Aug. 30, 2013, from a Florida-based company, Robins Fantasy Inc., just as Grimes began to campaign.
The model is a 2003 Prevost, which seats 10 people, has two cabins and is 45 feet long. One online bus company advertises a $395,000 list price for the same model.
From the time the campaign began in earnest last July until the end of June 2014, the Grimes campaign has reported bus rental and fuel costs of $10,939 to Signature Special Event Services, according to the expenses in public documents highlighted by the campaign. The money is broken down like this: two payments last October at $1,800 and $380 for bus rentals in the third quarter of 2013; $1,900 in March to Signature for bus rentals in the first quarter of 2014; an additional $380 on April 30 ahead of the primary. Two additional payments on June 30 at $5,334 and $1,145 covered bus rentals in the second quarter of this year.
The campaign spent another $5,500 to Signature for it to “wrap” the bus with her campaign logo, which includes a picture of the candidate.
Several bus operators said the campaign appears to be paying significantly less than usual for its daily rental costs.
“It typically costs about $2,000 per day,” said an operator of a bus company working in Kentucky who asked for anonymity to avoid angering potential clients. “That’s the industry standard.”
The firm that sold the bus to Lundergan’s company typically charges about $1,500 per day to rent the same vehicle. A similar bus rented this summer by Sen. Lamar Alexander’s (R-Tenn.) campaign ran $1,700 per day, costing the campaign about $40,000 in 15 days, according to campaign sources.
And McConnell, who barnstormed eastern and western Kentucky in the last two weeks, spent at least $2,200 per day on his 45-foot bus rental during the three-day swing, a campaign official said.
“If they can show that in fact that her campaign could have gone on the open market and gotten the bus for that price, then it’s market value,” Noble said. “But if all the evidence is that the bus would have cost several times as much, then that’s not going to work.”