Newly disclosed FEC records shed light on Ernst ‘dark money’ case

A central Iowa group that allegedly spent close to $1.5 million supporting Sen. Joni Ernst’s 2020 reelection campaign says newly disclosed records from the Federal Elections Commission support the dismissal of a lawsuit against the organization.

The FEC records show that while the commission’s general counsel found reason to believe several election laws were violated in connection with the Ernst campaign and wanted to launch an investigation, the six-member commission was evenly split on the issue and so the matter was dropped.

The lawsuit against Iowa Values, an organization based in Clive, was filed in 2021 by the Campaign Legal Center, a national, nonpartisan advocacy group. The litigation marks the first known use of an obscure provision in federal campaign law that allows a private individual or group to take a claim of campaign finance violations directly to federal court if the Federal Election Commission fails to act on the matter.

The CLC’s lawsuit was triggered by the FEC’s apparent inaction on a complaint that the CLC filed against Iowa Values in 2019. When dealing with a complaint, the FEC can, with the approval of at least four members, find that there is a “reason to believe” a violation has occurred and pursue the matter. If at least four members of the commission find there’s no reason to believe a violation has occurred, the panel can then vote to dismiss the matter and close the file.

In the Iowa Values case, the FEC deadlocked 3-3 on the question of whether to pursue the matter, and then it failed to muster the necessary four votes to close the file. That opened the door to the CLC’s effort to have the complaint – which wasn’t being pursued by the FEC, but technically was not closed — heard in court by a federal judge.

Iowa Values fought back, arguing that by refusing to close cases, three FEC commissioners had created the mere “appearance” of an unlawful delay in handling cases when, in fact, the commission had already acted on those matters. The litigation over the past two years has focused primarily on that issue, rather than the underlying complaint alleging pro-Ernst ads were paid for by Iowa Values using so-called “dark money” from unidentified donors.

Part of those allegations revolve around a registered fundraiser for the Ernst campaign, Claire Holloway Avella, who wrote to potential donors “on behalf of Iowa Values” in July 2019 and stated the “purpose of our group, Iowa Values, is to push back against these negative attack ads” against Ernst.

In her email, and in an attached strategy memo, Avella asked for contributions of $50,000 to help Iowa Values shore up support for Ernst among the Iowa voters who “represent the ‘firewall’ between winning and losing in 2020 for Senator Ernst.” She assured the potential donors their contributions to Iowa Values would not be publicly disclosed.

One of the ads Iowa Values ran that year stated, “We deserve leaders who share our values, like Joni Ernst.” Another ad stated, “We deserve leaders who have walked in our shoes and share these beliefs — like Joni Ernst, standing up for Iowans all across our state and fighting for what we believe in.”

In court, Iowa Values argued those ads were mere “issue advocacy” and didn’t contain the “magic words” of expressly encouraging people to vote for Ernst. The CLC argued the ads “could only be interpreted by a reasonable person as advocating Senator Ernst’s reelection.”

Counsel recommended investigation, subpoena power

Several weeks ago, Iowa Values received a letter from the FEC stating that the commission had finally closed the complaint file on Aug. 29. As a result of the case file being closed, FEC records that shed new light on how the complaint was handled were made public.

Those records show that on Sept. 25, 2020, the FEC’s Office of General Counsel provided the commission with a detailed, 57-page report recommending the commission find reason to believe that several violations of federal election laws had occurred in the Iowa Values case.

Specifically, the report stated that “the available information indicates that Iowa Values’ major purpose was to support Ernst’s candidacy, which requires its registration as a political committee under the Federal Election Campaign Act.”

The report went on to say there was reason to believe that:

Iowa Values failed to register and report to the commission as a political committee.Iowa Values failed to file reports of independent expenditures for internet advertisements that referred to or depicted Joni Ernst.Iowa Values made prohibited, in-kind corporate contribution to the Ernst campaign through the republication of campaign materials.The Ernst campaign violated the Federal Election Campaign Act’s restrictions on soft money by unlawfully soliciting non-federal funds in excess of $5,000.

The general counsel proposed that it be granted subpoena power to investigate the full nature and extent of Iowa Values’ federal campaign activity during the 2018 and 2020 election cycles in order to determine whether that organization should have registered and reported as a political committee.

“The investigation will also seek to determine the role that Ernst may have played with raising funds for the group,” the report stated.

A spokeswoman for the Ernst campaign declined to comment on the general counsel’s recommendations when contacted Thursday.

Commission rejects counsel’s recommendation 

The FEC considered the general counsel’s recommendations, but on a 3-3 vote, the members deadlocked on the question of whether there was reason to believe any violations had occurred. Without the required four votes to launch an investigation, the commission in effect declined to pursue the matter.

In a subsequent letter to Iowa Values, the commission explained the rationale for its decision by stating Iowa Values’ advertisements “did not, in our view, qualify as reportable independent expenditures,” and said there was “insufficient” evidence to support a reasonable inference that the majority of Iowa Values’ spending was to support Ernst’s candidacy.

The commission also stated that the evidence before the commission did “not support a reasonable inference that Ernst or her agents established, financed, maintained, or controlled Iowa Values” or that the conduct of the senator’s representatives’ amounted to a prohibited solicitation of non-federal funds.

In its letter, the commission pointed out that “not one of the advertisements” Iowa Values ran in support of Ernst “contains a reference to an election, to Ernst as a candidate in an election, or a call for voters to take electoral action.”

The commission also faulted its general counsel for relying “heavily upon a leaked strategy memo and a fundraising solicitation discussing a strategy to support Ernst and soliciting funds for these efforts.” The commission said “leaked memos and solicitations alone are inherently subjective and ambiguous, and seldom reflect the full internal discussion within an organization or its actual activities.”

As for whether certain individuals — such as Avella — had been working on behalf of both Ernst and Iowa Values during the campaign, the commission noted that “individuals can wear multiple hats and serve different principals in the context of fundraising activities.”

With regard to the complaint that Iowa Values made prohibited, in-kind corporate contribution to Ernst’s campaign when it disseminated, through Facebook and Google ads, pictures taken directly from the Ernst campaign’s website and Facebook page, the commission said that such acts didn’t amount to “actual coordination” between the campaign and Iowa Values.

With FEC case closed, lawsuit is challenged again

After the commission voted against its general counsel’s recommendations, the panel twice voted on closing the file — once in January 2021 and once in January 2022. In both instances, the commissioners who voted to find reason to believe that violations had occurred also voted against closing the file, opening the door for the CLC and others to take the matter up in federal court.

Now, however, with the commission’s Aug. 29 vote to close the case file, the CLC is facing another challenge to its efforts to have a federal judge hear the case.

In a newly filed motion for dismissal, attorneys for Iowa Values argued last week that if the court case proceeds, there are only two possible outcomes: a decision that favors Iowa Values, which would be duplicative of the FEC’s work, or a decision that favors the CLC, which would be inconsistent with the decision made by the FEC.

Either outcome, the attorneys for Iowa Values argue, “would only be a waste of the court’s and the parties’ time and resources.”

They also argue that the commissioners who previously voted against closing the case did so only as “part of a broader strategy of weaponizing the previously routine vote to close the file in order to artificially trigger” the provision of federal law that allows people to have their complaints heard in court when the FEC fails to act on a matter.

The CLC has yet to file a response to Iowa Values’ latest motion to dismiss, but in response to previous motions, it argued that Iowa Values was “a dark money group that solicited and spent thousands of dollars in undisclosed money to influence a hotly contested race for the United States Senate.”

Iowa Values is a nonprofit, tax-exempt corporation, and is not registered as a federal political committee subject to laws that require the disclosure of donors. Federal campaign finance laws require organizations whose “major purpose” is campaign activity, and which receive contributions or make expenditures of more than $1,000 per year, to register with the FEC as a political committee, and they must file periodic reports disclosing their receipts, disbursements and debts.

So-called “dark money” organizations are allowed to raise and spend unlimited amounts of money to support a candidate or attack his or her opponent without revealing their donors, but the law forbids such groups from coordinating those efforts with a candidate’s campaign.

Iowa Capital Dispatch is part of States Newsroom, a network of news bureaus supported by grants and a coalition of donors as a 501c(3) public charity. Iowa Capital Dispatch maintains editorial independence. Contact Editor Kathie Obradovich for questions: info@iowacapitaldispatch.com. Follow Iowa Capital Dispatch on Facebook and Twitter.