Missouri lawmakers are considering stricter controls on how political action committees can spend their money, after a Kansas City Star report last week about a PAC funded by former House Speaker Tim Jones.
Jones, a Republican who left the House in 2014, last year transferred roughly $650,000 he had raised over the years from campaign contributors into a PAC called Leadership for America. The PAC has no other donors besides Jones.
During the first nine months of 2017, Leadership for America reported donating around $18,000 to charities and $10,000 to a handful of GOP candidates.
But, The Star reported, the PAC also spent heavily on golf outings, meals, travel, liquor, cigars, baseball tickets, office renovations and other expenses that critics say appear to violate the prohibition against using campaign money for personal business.
While the PAC’s spending has drawn criticism, the fact that it has invested a large chunk of its campaign cash into a hedge fund — and that the investment has nearly doubled in value in just nine months — is also getting attention.
Missouri lawmakers voted last year to prohibit candidates from making these sorts of investments, but the ban doesn’t apply to PACs that aren’t associated with candidates.
State Rep. Kip Kendrick, a Columbia Democrat, says it’s time to revisit that 2016 law.
“We’re seeing money that is supposed to be used for campaigns being invested and then used for what appears to be personal benefit,” Kendrick said.
Both Kendrick and state Rep. Mark Ellebracht, a Liberty Democrat, filed legislation earlier this year that would have required candidates to dissolve their committees after they leave office if don’t file to run for another office within four years. Their bills didn’t get any traction.
Ellebracht said his bill was aimed at “stopping people from using these committees as their personal piggy banks.”
He plans to revisit the issue when lawmakers return to the Capitol in January.
“If people had any idea that there were politicians out there literally getting rich off of lobbyist money after their term in office was over, they would be beside themselves,” Ellebracht said.
Crafting a law that is constitutional banning independent PACs from this sort of investment would be difficult, said state Rep. Jay Barnes, a Jefferson City Republican who sponsored the 2016 legislation. But he stands behind the purpose of his 2016 bill.
“The raising of campaign funds should be related to support for a candidate’s vision and philosophy of government,” Barnes said. “I don’t think candidates should be able to turn around and use that money on exotic investments to create forever funds from which to use for purposes unrelated to elections.”
Leadership for America started the year with about $656,000. It has received no contributions this year and it spent more than $140,000.
Yet by Sept. 30, it reported having $864,000.
The increase stems from Leadership for America’s earning hundreds of thousands from an investment in a hedge fund managed by an Austin, Texas-based company, LRT Global Opportunity LP.
The firm is run by Lukasz Tomicki, a former longtime consultant with Pelopidas LLC, the St. Louis lobbying firm connected to Republican mega donor Rex Sinquefield. Jones works as director of political communications at First Rule Media Network, a division of Pelopidas.
Leadership for America had $353,000 invested in the fund as of Jan. 1.
By Sept. 30, the PAC reported it had earned roughly $347,000 from that investment — a 98 percent return.
Jones donated his campaign cash to Leadership for America shortly before the law banning candidates from this sort of investment went into effect. The donations also were made before voters approved a constitutional amendment capping campaign contribution last November.
James Klahr, director of the Missouri Ethics Commission, said that under the voter-approved law, candidates are prohibited from donating to PACs. So far no one has brought a lawsuit challenging that prohibition, Klahr said, despite the fact that many similar provisions in the law have been struck down this year as unconstitutional.
Jones’ PAC investing in a hedge fund appears to be unique in Missouri politics.
But in 2006, then-Democratic candidate for New York attorney general Andrew Cuomo drew criticism in that state when he invested half of his campaign money in a hedge fund.
Cuomo, now governor of New York, earned a 20 percent return on his investment.
Tomicki, who started his company in 2012, said he couldn’t comment on his clients. But he did note that 2017 has been a great year for his investments.
Jones referred all questions about the PAC to Tom Smith, his former legislative chief of staff and longtime political adviser. But Jones did use Twitter to resoundingly dismiss the questions surrounding his PAC, calling The Star’s report a “defamatory hit job.”
Smith defended the spending on golf, baseball tickets and travel as legitimate expenses that further the mission of the PAC by helping build coalitions with other conservative organizations. He added that Jones isn’t the only person benefiting from that spending. The board of directors of a nonprofit associated with the PAC have also participated in the coalition building, he said.
Smith declined to say who serves on the board of the nonprofit, which is also called Leadership for America. The nonprofit must file paperwork with the Missouri secretary of state’s office by Dec. 11 that would include details about the board.
As for the investment, Smith said the dramatic increase in the fund’s value can be attributed to “wise investment decisions and the fact that the market is doing great.”
“We have a Republican president that believes hard work yields dollars, and the market seems to agree with him,” Smith said. “Our investment has done really well since (President Donald) Trump got elected.”
Michael O’Doherty, an associate professor of finance at the University of Missouri-Columbia, said it’s tough to draw many conclusions about the PAC’s investment without knowing the details of how it’s invested or the specific trading strategies.
However, O’Doherty said the 98 percent return the PAC appears to be earning would certainly be “more extreme than what an average hedge fund would deliver in a given year.”
Ryan Flugum, an assistant professor of finance at the University of Tulsa, said a return that high “it’s not out of the realm of possibilities for sure.”
“But hedge funds recently have not done great,” he said. “There’s always a statistical chance someone will have a huge return. Consistently, though, that’s a different question.”