NORTH CAROLINA STATE BOARD OF ELECTIONS CAMPAIGN FINANCE INVESTIGATION FINDINGS SUMMARY Investigation Title: Potential campaign finance violations connected to the sweepstakes café industry Complainant: Bob Hall on behalf of Democracy North Carolina Background On April 21, 2013, Bob Hall, Executive Director of Democracy North Carolina, filed a sworn complaint with our office alleging potential criminal violations relating to campaign contributions connected to the sweepstakes café industry. The complaint was based on two earlier reports (press releases) released by Democracy North Carolina. Democracy North Carolina identified Chase E. Burns as the single largest individual donor to NC General Assembly candidates in the 2012 election cycle. Burns was the owner of International Internet Technologies, LLC (ITT), of Anadarko, Oklahoma. Burns was arrested on March 12, 2013, in connection with an illegal gambling business in Florida. Democracy North Carolina (DNC) alleged several possible violations of NC campaign finance laws regarding Mr. Burns and other individuals related to the sweepstakes industry. The following report outlines each of the allegations, the statutory basis of the allegation and the staff’s investigative findings. Any additional related questions or issues identified during the 1 course of our investigation were investigated prior to concluding the investigation. Attached to this report are Bob Hall’s complaint and associated press releases. Investigative Findings: Mr. Hall’s complaint identified political committees that had received contributions from Chase Burns. Since a significant number of legislative committees do not file electronically and their data is not in our searchable database, a review of all manually filed reports was conducted to identify any additional contributions that may have been received by political committees not included in our electronic data. As a result of this review, additional contributions were identified and those committees were contacted in addition to those identified by Mr. Hall. Since the potential allegations could involve violations committed by contributors, the receiving political committees or any lobbyist involved with the handling of identified contributions, it was necessary to gather information regarding the circumstances of the identified contributions. Additionally, our investigators traveled to Florida to meet with investigators who had been involved with the investigation and indictment of Mr. Burns related to the Florida sweepstakes business. The Florida investigators provided more than 13,000 records, including financial records for Chase Burns and several of his associated businesses, including IIT. In addition to financial records, personal and business record-keeping files, invoices, contracts, memorandums and other documentation maintained by Chase Burns and his wife Kristin Burns were reviewed and analyzed as part of the investigative process. The following identifies each potential violation that was alleged by Mr. Hall and any additional potential violations we investigated. Issue One: The payee lines of many of the Chase Burns contribution checks had handwriting that differed from the signature on the check. NCGS 163-278.14(b) prohibits a political committee from accepting a contribution from a contributor if the contribution does not contain a specific designation of the intended contributee chosen by the contributor. 2 FINDING: After interviewing and/or gathering information from individuals associated with the receiving political committees, there is no evidence that any receiving political committee received a contribution in the form of a check that did not contain a completed payee line with the specific designation of the intended recipient. The evidence gathered showed that all checks from Chase Burns were mailed to Chris Clifton at Grace, Tisdale and Clifton, a law firm in Winston-Salem. Documents maintained by Mr. Clifton were provided to our office and showed that he received the checks from Mr. Burns and mailed those checks to Moore and Van Allen, a law firm in Charlotte. Mr. Clifton provided information that Chase Burns/IIT had been a client of his firm for several years and in 2012 Mr. Burns wished to engage politically in North Carolina. Therefore, the law firm of Moore and Van Allen was hired by Mr. Burns to provide public affairs work including lobbying and grassroots services. Grace, Tisdale and Clifton was paid a weekly retainer by Chase Burns and IIT for legal services in North Carolina. Moore and Van Allen provided suggestions for political giving to Mr. Burns, and Mr. Burns mailed checks to Grace, Tisdale and Clifton. The checks as mailed contained the completed payee line with the specific designation of the intended recipient. Mr. Clifton stated that copies were made of the checks and no alterations were made to the checks. Additionally, individual business owners that contracted with IIT would on occasion deliver checks they had made payable to North Carolina political committees to Grace, Tisdale and Clifton for distribution to those candidates. These checks would also be included with the checks from Chase Burns and mailed to Moore and Van Allen. The checks were mailed in the same condition as they were received by Grace, Tisdale and Clifton. Nancy Smith at Moore and Van Allen confirmed that they did not receive any contributions for distribution from Chase Burns directly. She stated that all contributions were received from Chris Clifton, and the payee lines were completed when they were received by her firm. Issue Two: If Mr. Burns gave checks to another political committee or other entity without specifically designating the intended recipient and the receiving entity made the determination of the recipients, those contributions would be given in the name of another. 3 NCGS 163-278.14(a) prohibits contributions given in the name of another. FINDING: From the beginning of this investigation, attempts were made to reach Chase Burns. For several months we received no communication from Burns or anyone on his behalf. At the point Mr. Burns had reached an agreement with prosecutors in his Florida criminal case, his attorney, Drew Neville, returned our phone calls. He stated that all campaign contributions made by Chase Burns were at Mr. Burn’s specific direction. Mr. Neville stated that all checks were signed by Mr. Burns and he, his wife or assistant completed the payee lines. Mr. Neville provided a document that had been created by Kristin Burns which provided the check numbers and the individual that completed the payee lines for the checks. (Exhibit 1-Document provided by Chase Burns attorney) We had asked Mr. Neville to provide a sworn statement from Mr. Burns, his wife and assistant attesting to these reported facts. Mr. Neville had several discussions with our office regarding these statements and after it was reported in the media that State and federal law enforcement agencies were investigating this complaint, Mr. Neville stated that, in light of other law enforcement involvement and the legal issues that his client has been facing in other states unrelated to political contributions, he would be advising Mr. Burns not to provide any additional information. We have reviewed documentation from the Florida criminal investigation that includes memos and spreadsheets related to political contributions made in North Carolina. Included in this documentation are documents related to work performed by Moore and Van Allen including the recommendations they made to Mr. Burns regarding North Carolina political contributions. Information contained within the documentation obtained from Florida provides no evidence that North Carolina contribution checks were mailed without the specific designation of the political committees contained on the payee lines. The individual names of all political committees that were written checks from the Chase Burns Trust account were documented in a spreadsheet along with all other expenditures from that bank account. There was no general designation given to the North Carolina political contributions. The spreadsheet indicated the check number of each check written to the specific political committee. 4 During our review of the records of Chase Burns we obtained a copy of a memorandum and spreadsheet that was provided to Chase Burns from Moore and Van Allen. The document was entitled “IIT Political Contribution Strategy.” (Exhibit 2- Moore and Van Allen document and spreadsheet) This document provided Moore and Van Allen’s recommendations for political contributions. Included in these recommendations are the names of the candidates and the recommended amounts of the contributions. A spreadsheet was also created by Moore and Van Allen that provided the committee name and address for their political contribution recommendations. With respect to Mr. Burn’s personal contributions, he substantially followed the recommendations provided by Moore and Van Allen. Issue Three: The permissibility of the contribution checks given by Chase Burns to the recipient political committees. NCGS 163-278.19 prohibits business entities, corporations, labor unions, insurance companies, and professional associations from making contributions to political committees. FINDING: In Mr. Hall’s complaint and press releases, he questions whether business contributions were made by Chase Burns and received by recipient committees. Mr. Hall’s March 18, 2013, press release states, “Hall also said that the many references