The John Edwards Loophole?

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Ben Smith has a great observation on the case against former senator and vice presidential candidate John Edwards:

A reader points out that one of the reported subjects of the FBI investigation into John Edwards is the way in which the 527 run by an aide, the Alliance for a New America — its actual independence is in question — hid some of its spending in an private company, Alliance for a New America LLC.

It’s not actually clear that this is illegal. And if Edwards or his aide, Nick Baldick, isn’t prosecuted for this, they may have laid out a roadmap for every 527 that doesn’t want to disclose its vendors.

“If that holds up, it’s a game changer for 527s,” my correspondent notes.

Yes, if this holds up it would be a game changer. It would mean that a 527 could move its money into a limited liability corporation and spend it from there leaving the public unaware of how that money was being spent.

This does, however, seem quite illegal. It sounds quite a bit like money laundering, which former House Majority Leader Tom DeLay was just convicted of. DeLay’s case centered around his use of multiple political committees to obscure transfers of corporate contributions.

The Associated Press article notes:

Federal records show about $3.3 million of the $4.8 million raised by the 527 was distributed to AFNA LLC for unspecified “consulting services.” The 527 and the LLC shared not only their name, but the same Alexandria, Va., post office box and the same contact, a Baldick associate named Katherine Buchanan.

This potential “John Edwards loophole” is worth paying attention to.

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