Ocasio-Cortez, Justice Democrats, and the Art of the Scam PAC

New York Democratic Rep. Alexandria Ocasio-Cortez’s congressional floor speech against “dark money” may be one of the most watched political videos on Twitter, but now she’s facing allegations for her own “dark money” abuses.

Recently, the National Legal and Policy Center (NLPC) filed a formal complaint with the Federal Election Commission (FEC) alleging that Rep. Alexandria Ocasio-Cortez and her current chief of staff Saikat Chakrabarti violated several campaign finance laws over the course of her 2018 congressional campaign.

Rep. Ocasio-Cortez allegedly failed to disclose her leadership role in the Justice Democrats PAC, which was run by her future campaign manager and chief of staff Saikat Chakrabarti, during her long-shot primary run against Rep. Joe Crowley. Such an arrangement would void the legal independence of Rep. Ocasio-Cortez’s campaign from the Justice Democrats PAC—making any contributions exceeding the $5,000 limit on contributions from federal PACs to candidates illegal.

Even if Rep. Ocasio-Cortez and Saikat Chakrabarti didn’t violate campaign finance laws, the structural arrangement of Rep. Ocasio-Cortez’s affiliated PACs, Justice Democrats and Brand New Congress, is deceptive—the arrangement is commonly referred to as a Scam PAC. While right-wing Scam PACs have been around since the Tea Party movement, it appears that these two organizations add to the growing trend of left-wing Scam PACs.

What Is a Scam PAC?

Essentially, a Scam PAC is when a PAC raises money from small-dollar donors and pours the money into consulting firms tied to the PAC’s officers. Scam PACs are so deceptive, a 2015 Vox article likened Scam PACs to Ponzi schemes. Technically, Scam PACs are not illegal, but they are incredibly harmful to the political process as they can mislead donors and abuse the mechanics of campaign finance laws.

State laws require that PACs disclose how they spend their money, so any expenditures on TV advertisements or political mailings must be reported. If a PAC spends most of its money on a vendor who offers multiple consulting or campaigning services, then a PAC will disclose the aggregate amount of money funneled to such shell-companies (usually labeled as campaign consulting fees), but there will not be a line-item breakdown of how that lump-sum of money is spent. Once the money is paid out to a company and reported to the FEC by the PAC, it is no longer subject to disclosure.  What makes a Scam PAC truly a scam is that the vendors and the PACs are run by the same people. This can be interpreted as PAC officers either paying themselves, hiding how they spend their money, or both.

Between his two PACs, Justice Democrats and Brand New Congress, Chakrabarti raised around $3.3 million. Around $1 million of that sum was funneled to companies owned by Chakrabarti (Brand New Congress LLC and Brand New Campaign LLC). Another $300,000 was funneled to Middle Seat Consulting, a political consulting firm co-founded by Justice Democrats and Brand New Congress co-founder Zack Exley. In classic Scam PAC fashion, Rep. Ocasio-Cortez’s affiliated PACs sent a bulk of the money collected to consulting firms managed by the PAC co-founders.

Campaign Finance Disclosure

According to Anthony Corrado’s The New Campaign Finance Sourcebook, the 1976 court case Buckley v. Valeo (the first major Supreme Court case to address campaign finance laws) sanctified federal campaign finance disclosure requirements as constitutional and necessary for two reasons. First, by “exposing campaign fundraising and spending to public scrutiny,” disclosure requirements deter “actual and apparent corruption in the nation’s democratic process.” Second, disclosure provides “valuable information to voters and therefore contributes substantially to the maintenance of an informed electorate.”   Disclosure requirements were challenged but upheld in a 2003 Eleventh Circuit Court decision.

Thus, disclosure requirements attempt to serve the public interest through an “anti-corruption interest” as well as an “informational interest” for voters. By funneling money through a shell company, Justice Democrats and Brand New Congress sidestepped PAC disclosure requirements and openly violated the basic tenant of disclosure long-heralded by campaign finance reformers.

Although Rep. Ocasio-Cortez’s campaign website directly calls for an overhaul of the campaign finance system and to overturn Buckley v. Valeo, she insists on maintaining a regulatory framework to enforce disclosure laws. According to her website:

Alexandria will insist on legislation to require wealthy individuals and corporations who make large campaign contributions to disclose where their money is going. This will be enforced via legislation, action by the Securities and Exchange Commission, Federal Election Commission, and Federal Communication Commission, and federal legislation requiring government contractors to disclose their political spending.

It is unimaginably hypocritical for Rep. Ocasio-Cortez to call for a campaign finance system that prioritizes transparency and disclosure while simultaneously avoiding full transparency in her own campaign.

The Grassroots Masquerade

Ironically, Justice Democrats claims that funneling money to Chakrabarti’s LLCs is necessary to adhere to campaign finance regulations, when realistically such an arrangement is a convenient means of avoiding certain campaign finance regulations. Again, Scam PACs aren’t inherently illegal, but their deceptive nature intentionally prevents voters from making informed decisions.

Justice Democrats further explains that it chose to incorporate as a PAC rather than a SuperPAC as part of its platform to support the “removal of the corrupting influence of corporate and big money in our democracy.” PACs are capped at $5,000 for contributions, thus it is literally impossible for them to solicit more than $5,000 in contributions from large or wealthy donors. By opting strictly for PAC status, Rep. Ocasio-Cortez can claim that her support truly is grassroots, and she can continue to demonize the influence of so-called “dark money” in politics.

This is not the first campaign controversy for Justice Democrats or Rep. Ocasio-Cortez. Former Justice Democrats-endorsed candidate Hector Morales accused the group of selling endorsements for large sums of money in 2018, after he revealed on Twitter that Justice Democrats charged him 95 percent of his campaign contributions as payment for their support. Similarly, the State of New York fined the Ocasio-Cortez campaign $1,500 for failing to provide workers’ compensation. Some “unapologetic champion” for the working class.

Inexperience?

In the defense of Rep. Ocasio-Cortez and Saikat Chakrabarti, it is quite possible that their bookkeeping blunders were not nefarious in nature. Remember, the founders of Brand New Congress and Justice Democrats had little to no political experience prior to their work on the 2016 Bernie Sanders presidential campaign.

Co-founder Alexandra Rojas was a community-college student working three jobs before she worked on the Sanders campaign, and now the 24-year-old is the executive director of a political PAC that has raked in millions of dollars over the past few years.

Similarly, current Rep. Ocasio-Cortez chief of staff, Saikat Chakrabarti, worked in Silicon Valley as a software engineer before the 33-year-old became involved in the Bernie Sanders campaign. Twenty-nine-year-old Rep. Ocasio-Cortez worked as a bartender prior to running for office.

It’s easier to make mistakes if you aren’t a seasoned political operative with decades of experience organizing and running campaigns and PACs. Regardless of whether Rep. Ocasio-Cortez’s campaign finance mishaps were intentional or due to carelessness and inexperience, they blatantly contradict her calls for campaign finance.

Considering Rep. Ocasio-Cortez has revered the ability of someone to apologize after an honest mistake, it would make sense if she openly apologized for her own potential rookie mistake. Yet, she quietly removed herself from the board of Justice Democrats after a new corporate filing document was submitted to the Washington, D.C., Department of Consumer and Regulatory Affairs in the wake of accusations of campaign finance fraud.

Given this track record, there will be future occasions when Rep. Ocasio-Cortez unintentionally refers to herself when she admonishes abusers of the current campaign finance system. Taken in context, her questions during a House ethics hearing ring awfully true:

We have these influences existing in this body, which means that these influences are here in this committee, shaping the questions that are being asked of you all right now…would you say that that’s correct?

But before she seeks to purge the campaign finance system of abuse, she might want to get her own house in order.