Vermont Democratic Party fined for inaccurate financial reporting

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Editor’s note: Kate Robinson contributed to this story.

The Federal Election Commission has levied a $2,500 fine against the Vermont Democratic Party for failing to accurately report its financial activities over a two-year period.

Vermont Democratic Party Treasurer Edward Clark says: “There was no money missing. Nobody took anything.”

Clark, however, who has been responsible for correcting dozens of reports to the Federal Election Commission, called the accounting situation a bookkeeping “nightmare.”

In November, the commission sent a letter to the party stating that it would refer the party’s case to a compliance arm of the federal agency, the Alternative Dispute Resolution Office. This was necessary, according to the commission, because of the number of requests — 24 in all – that it had issued to the Vermont Democratic Party for additional information about mathematical discrepancies, failure to provide supporting schedules and failure to accurately differentiate between federal and non-federal activity during the 2007-2008 election cycle.

The “mathematical discrepancies” cited by the commission in the 2007 year-end report (filed in January 2008) totaled $140,954, according to a Nov. 16, 2009 chart from the commission detailing the Vermont Democratic Party’s errors. The chart also shows that the year-end report for 2008 (filed in January 2009) included errors that added up to $47,075.

Most of the mistakes, according to the former treasurer and current vice chair of the party, Michael Inners, were misclassifications of transfers between accounts. “No donations were misreported,” Inners said.

In March, the party negotiated a settlement with the commission in which it agreed to:
• Pay a fine of $2,500 for errors made in reporting during the 2007-2008 election period;
• Contract with an external compliance specialist to review reports;
• Develop a compliance manual;
• Formalize the process for monthly reconciliation of bank accounts.

Robert Dempsey, executive director of the VDP, who is working with Clark to clear up the accounting problems, characterized the financial reporting anomalies as “hiccups.”

“Certainly, the situation I inherited wasn’t the easiest to figure out,” Dempsey said. “I likened it to untangling a spool of Christmas lights. We’re working closely with the Federal Elections Commission to make sure they have the information they require and that we are moving forward properly reporting all of our financial activity.”

David Levinthal, communications director for opensecrets.org, which is part of the Center for Responsive Politics, said, “Anytime you have a committee or a party that is filing untimely reports or filing reports that contain errors, it serves to erode transparency.”

The Vermont Democratic Party has hired a compliance consultant based in Washington, D.C., an attorney and a bookkeeper to help straighten out the party’s filings.

In an effort to rectify the accounting mistakes, the Vermont Democratic Party has amended many of its reports. In 2008, for example, the Democrats filed 29 amendments. In that same year, the Vermont Republican Party amended four reports.

Inners explained: “When you file one (amendment), you have to file more. If you change anything at the beginning of the year, you have to change all the rest. It begins to cascade on you when you start amending. They make you refile the whole report, not just the change.”

Levinthal said it’s not unusual to see a few amendments here and there, but that the large number filed by the Vermont Democratic Party is abnormal. In a situation like this, he said, “where literally every other report seems to have an amendment to it and going back years and years — you just don’t know if the Vermont Democratic Party is providing accurate information or not when they’re filing the report.”

“These processes are in place in order to allow the public to have a very clear and accurate look at the accounting of political parties that sponsor the candidates who they are going to elect to office,” Levinthal said. “When you have a committee or a party that is habitually skirting the rules, or not closely following the rules, then it does a disservice to the public’s access to information that they have every right under the law to have access to.”

Dempsey said the Vermont Democratic Party is taking the FEC’s concerns very seriously.

“What’s indicated to the FEC is exactly what I found and really what it ultimately goes back to, and if you check out other state parties, you’ll find out this is fairly standard,” Dempsey said. “We were assured that in grand scheme of things, this is not the worst situation a state party has ever found itself in.”

The largest fine assessed to a state party, according to the FEC administrative fines database, which goes back a decade, was $16,000 to the Republican Party of Minnesota in 2000.

Our neighbors in northern New England have also been in hot water for FEC compliance issues. The New Hampshire Democratic Party was fined $2,000 in 2009; the New Hampshire Republican State Committee was assessed a fee of $4,500; the New Hampshire Democratic State Committee paid $1,000 in 2004; and the Maine Republican Party was fined $460 in 2006. The largest amount paid out was $12,000 by the New Hampshire Republican State Committee for failing to file a report after the 2000 election.

In general, candidates and political action committees dominate the FEC’s administrative fines list. Few state parties have been penalized, according to the agency’s database. About 250 entities – political action committees, candidates and county and state party committees – nationwide in 2008 (an election year), were fined for failure to file reports or for failure to file in a timely way. In the last 10 years, about a dozen state parties have made the list, most of which were affiliated with the Republican Party, according to data obtained from the FEC’s administrative fines list.

Piecing together the puzzle

How did the Vermont Democratic Party get in such a pickle? Edward Clark, the party treasurer, said the FEC filing errors became “really serious at the end of the 2008 campaign.”

“That’s when there was a fair amount of chaos, with changes in staff, staff leaving, inexperienced people working in the office and the executive director leaving,” Clark said.

One of the problems associated with the 2008 election had to do with where the records were kept, according to Clark. During the campaign, the accounting records were housed in the coordinated campaign office for the Vermont House and Senate races in Burlington.

Inners, the former treasurer, said moving the records to Burlington was a “mistake.” Inners has been working with Clark and Dempsey to straighten out the books.

“I think it was a matter of convenience,” Clark said. “Because everyone was working out of Burlington, they brought everything over. … Everybody was involved in the campaign and probably not paying a lot of attention to the very boring business of keeping books and filings. And then it became a bigger problem when the move took place, the executive director left, there was a change in leadership, and the chairperson resigned.”

After the election, Clark says, the records were moved back to the Montpelier office and “basically dumped there, along with the computers.”

“One of the first decisions I made as treasurer was — everything stays in Montpelier,” Clark said.“Nothing leaves, and I know who’s in charge, and as I say, I review everything once a week.”

Both Clark, the current treasurer, and Dempsey, the executive director, both of whom say they were brought in to clean up the mess, have worked to professionalize the bookkeeping. Until last year, the party had relied on volunteers and part-time employees to help with the accounts, they both said.

The office didn’t have a bookkeeper for a number of years, Inners said, and relied on the finance director, whose most essential function is fundraising for the party, to balance the books. In 2008, the executive director also picked up the finance director role and, Inners said, there were five to six different people handling the finances and filings to the FEC.

“You did have volunteers and part-time people, and a check would come, and a part-time person would grab it and deposit it, and it maybe would go into the wrong account,” Clark said. “That doesn’t happen anymore. There are no volunteers, no part-time people who have anything to do with the money.”
Clark and Dempsey also blame the problems on high staff turnover.

Within a three-year period, from 2007 to 2009, the Dems had four executive directors: Jon Copans through 2007; Jill Krowinski from 2007 to May of 2008; Kristina Althoff from June of 2008 through January of 2009. Dempsey was hired last summer.

There was a similar turnover in treasurers: Michael Inners served in that role from 2006 to March 2009; Edward Frey from April to June 2009; and Edward Clark stepped in last July.

Frey, a bankruptcy attorney, resigned as treasurer because the role “required an awful lot, and I found myself commuting to Montpelier practically every day, and it just got to be a burden.”

“Some of the reports that were filed had some inaccuracies in them, and that’s it,” Frey said. In some cases, there were errors in transcription, in others the numbers just didn’t add up properly, he said.

There were also discrepancies in financial record-keeping for events, according to Frey, but he suspected no wrongdoing. “Once it was brought to their attention, they took care of it.”

Levinthal, of opensecrets.org, said turnover isn’t an acceptable excuse.

“Certainly a lot of political action committees and parties have limited staff and are running on limited budgets,” Levinthal said. “I think people can appreciate that, but that’s not an excuse for filing incorrect or misleading reports, which is simply a standard part of operations for any party or any committee.

John Burgess, a longtime Democratic Party activist, said the Lamoille County Democratic Committee, of which he is a member, was dissatisfied “with the transparency of the filings and found several of them to be inconsistent with each other.”

Burgess said the Lamoille County Democratic Committee passed a series of motions requesting that “the state committee either submit to an audit or re-evaluate its financial reporting.”

Burgess disagrees with Inners and Clark’s explanation that the financial reporting problems started in November 2008 during the election, suggesting they began earlier.

“Over time, I saw that the reports contained differing numbers and differing information,” Burgess said. “From there, I concluded something was awry.”

He said in the late summer of 2008, he began to compare reports filed with the state committee, FEC and the Vermont Secretary of State’s office and concluded at that time that “things were not quite right.”

“To say this is the fault of people who left after November is factually inaccurate,” he said.

Former Chair Ian Carleton, who presided over the party from 2001 to February 2009, would not speak on the record about the lapses in accounting; the current chair, Judy Bevans, did not return calls for comment about the fine.

Longtime Democratic activist and donor, Bill Stetson, said the FEC rules are complex, and accounting problems like those the Vermont Democratic Party has experienced “happen all over.”

“I don’t blame the state parties,” Stetson said. “They are dealing with a monumental task of dealing with constantly changing rules when it comes to the donation levels for various accounts and candidates. Every state is dealing with this.”

This isn’t the first time Vermont Democrats have gotten into financial trouble. In 2002, Frederick Lane III, a former treasurer for the Chittenden County Democrats, resigned from the Vermont Bar for using $1,500 from the county committee for personal purposes.

Follow Anne on Twitter @GallowayVTD

Comments

  1. Christopher Teel :

    Perhaps instead of petty sniping at other candidates, e.g. making premature and erroneous accusations against Phil Scott concerning financial wrong-doing, they ought to focus on keeping their own house in order.

  2. Connie Godin :

    Not surprised, the Montpelier office was staffed by two arrogant males with a dog who were having a lot of fun but no help to the voter trying to support the party.

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