The hunt for the Bosworth Legal Fund records. Does there need to be a law?

If you recall yesterday’s pro-Bosworth Robocall (Which you read first at SDWC, of course) made by Peter Waldron representing the made up organization “No Compromise,” which I’m assuming also means “no accountability,” someone raised the question asking “who is all behind this latest scheme? are they registered somewhere?”

And unfortunately, the response is likely “No.”

Because unlike a political campaign, there’s little or no accountability regarding who has donated, or how the money is spent. In fact, if you look at one of the fundraising letters from the Annette Bosworth Legal Support Fund (See page 9, specifically):

Bosworth Appeal December 2014

“This Legal Defense fund is not a campaign contribution, and is not reported to or regulated by the Federal Election Committee.” Whatever that is, since it’s actually the Federal Election Commission. And it continues… “Contributions to this legal defense fund are not tax deductible. There are no limits to the minimum or maximum amount contributed to this Legal Defense fund contributions go directly towards the personal support of Dr. Annette Bosworth.”

If this was a political campaign, we’d have reasonable assurances of how the money was coming in, and how it was going out. Same thing if this was a non-profit organization organized under certain IRS rules.

But it’s neither. It’s a legal defense fund. And with activities such as Lee Stranahan’s active media campaign against the Attorney General and Republicans, as well as yesterday’s robocall in support of Bosworth side of the upcoming trial, it begs the question of how much money came in, and how is the money is being spent?

Who is there to ensure fair dealing for legal defense funds set up to defend criminal charges arising from political campaigns? Well, in South Dakota, no one. Because it really hasn’t come up. Until now.

I posed the question to Attorney General Marty Jackley, who in addition to prosecuting Annette Bosworth would likely be called on to enforce any laws surrounding murky Legal Defense funds. I specifically asked Marty “are “legal defense funds” such as the one Bosworth is using to raise and spend money for her defense subject to any state reporting for receipts and expenditures?”

Jackley noted, “The appropriateness of legal defense funds is really fact specific and can fall into a gray area of the law.  Depending upon the circumstances it may give rise to or fall under State Deceptive Acts, Federal Election Law issues, Tax issues, and the Rules of Attorney Professional Conduct.  South Dakota does not have specific laws that regulate Legal Defense Funds such as other states like Michigan and North Carolina which regulate Legal Defense Funds as they pertain to public officials brought into court in connection with their official duties.”

The Federal Election law issues that Jackley brings up potentially opens up a can of worms for sitting members of Congress. But Bosworth is anything but. So, what are the Federal Election rules her legal defense fund IS required to follow?  According to opencongress.org and Public Citizen:

Here are the main features of a legal defense fund for members of Congress:

• The fund must first be approved by the respective body’s ethics committee.

• The individual must appoint a trustee to manage the account.

• All the funds must be used to pay only for investigative, civil, criminal or other legal proceedings relating to an officeholder’s election to office, official duties while in office and administrative or fundraising expenses of the trust.

• Contributions to the fund are limited to $5,000 per year in the House from any single source, and $10,000 per year in the Senate. House rules prohibit contributions from lobbyists and foreign nationals; Senate rules prohibit contributions from lobbyists, foreign nationals, corporations, unions and any member’s principal campaign committee.

• Campaign funds may be transferred by any officeholder into a House member’s legal fund. [Federal Election Commission, Advisory Opinion 2000-40, 2003-15] The use of campaign funds by a legal defense fund, however, must be strictly for legal and administrative expenses associated with the fund and not for personal expenses. Contributions to the fund do not count toward a donor’s limits on campaign contributions or gifts to officeholders. An individual and the individual’s immediate family may make unlimited contributions to their own fund.

• Quarterly financial reports must be filed with the Legislative Resource Center in the House or the Secretary of the Senate. House and Senate reporting requirements are substantively the same but differ in some technicalities. For example, in the House, the filings shall disclose all contributions and expenditures of $250 or more per year, including the full name and street address of donors and recipients of expenditures. In the Senate, the reporting threshold is $25 per year.

While most legal expenses related to election contests for candidates who are not officeholders must be subject to the limits and reporting requirements of federal election law, members of Congress thus far have been permitted to finance their legal expenses with either surplus campaign funds, legal defense funds established under ethics rules, or both.

Read it here.

So, how does that apply to Dr. Bosworth? If you’ll note, it indicates “most legal expenses related to election contests for candidates who are not officeholders must be subject to the limits and reporting requirements of federal election law.”  Which in an initial reading would make you think that there could be reporting required to be done. That’s IF the Senate Select Committee on Ethics asserts authority over former candidates.

A search of opensecrets.org failed to indicate a Bosworthian Legal Defense fund being operated as a 527 or other entity. (I’m currently awaiting a return call from the US Senate Select Committee on Ethics regarding the question if whether Bosworth is actually required to report or register a Legal Defense fund).

So, currently, there’s no information available to determine who has donated, and how it has been spent. And other than peripheral issues such as federal tax liability, and Federal Campaign Law which may or may not apply, there’s not much information out there.  And in South Dakota, the law simply does not address it.

Which begs the question – “Should it?”

I asked Attorney General Jackley if he would support legislation to increase the transparency of such funds to prevent fraud and abuse in both the raising and expenditure of proceeds?  He noted that “as Attorney General I would support reasonable legislation that would increase transparency of funds in order to prevent fraud and abuse in raising and expenditure of these funds so long as it does not affect the Constitutional rights of defendants.”

So does there need to be a law regarding the use of murky legal defense funds in court proceedings?