FEC audit shows South Dakota Democratic Party likely violated fundraising regulations

The South Dakota Democratic Party likely violated joint fundraising committee regulations, according to the leader of the Federal Election Commission.

But FEC Chair Ellen Weintraub was unsuccessful on Thursday to formally add that claim to a federal audit of the state party, and an FEC investigation into potential joint fundraising regulation violations in dozens of states, including South Dakota, has been closed without a definitive conclusion that violations took place.

A federal audit found that the SDDP under-reported its disbursements to the Democratic National Committee by $2.5 million during the 2015-16 election cycle. The SDDP was likely one of many state political parties that served as a pass-through for money transfers between Democratic presidential candidate Hillary Clinton's joint fundraising committee and the Democratic National Committee, Weintraub said during the FEC's meeting on Thursday.

Weintraub pointed out on Thursday that the SDDP transferred $2.5 million to the DNC on the same day it received $2.5 million from the Hillary Victory Fund.

"This is one in a series of committees that we've had before us that were engaged in these massive joint fundraising committees where money changed hands very quickly between one committee and another in a way that, I think, raises issues under the contribution limits," Weintraub said.

More:Audit: S.D. Democratic Party misstated financial activity by millions

The audit of SDDP doesn't mention Clinton or her joint fundraising committee called the Hillary Victory Fund. But the audit's findings stem from claims during the 2016 election that state political parties were partnering with joint fundraising committees to circumvent contribution limits — allowable when the U.S. Supreme Court created a new campaign finance loophole in 2014.  

Complaints have been lodged with the FEC against both the Hillary Victory Fund and President Donald Trump's Trump Victory committee regarding their use of state political parties in their 2016 campaigns, but the FEC's investigation has been stymied by Republican members of the FEC, according to Weintraub.

Dems working to fix 'unfortunate' financial situation

The SDDP's financial situation was "unfortunate and unexpected" to the party's new leadership, according to the party's statement issued on Wednesday night.

Ann Tornberg, the chair of the SDDP during 2015 and 2016, no longer holds the position. Paula Hawks was elected as the party's new chair in March, and Stacey Burnette was hired as the new executive director this month. Leadership plans to take steps to resolve the situation and rebuild the party in South Dakota "with transparency, accountability and integrity," the SDDP stated.

The state party is working with the FEC to address the problems in its financial reports dating back to 2015, according to Hawks. 

"Unfortunately, there has clearly been a lack of oversight in the financial management of SDDP," Hawks said in the statement. "Moving forward this new administration has and will continue to ensure accuracy in our reporting at all levels.

Republican Party chair: 'We told you so'

The South Dakota Republican Party was quick on Wednesday to connect the audit to the reports about the Hillary Victory Fund's work with state political parties. 

Party Chair Dan Lederman tweeted that the South Dakota Democratic Party "laundered millions of dollars for Hillary and now the chickens are coming home to roost for South Dakota Democrats."

The South Dakota Republican Party took credit on Wednesday for blowing the whistle on the state Democratic Party and recirculated a 2017 SD GOP press release alleging that Clinton's campaign used the SDDP as a pass through for $2.5 million for her campaign to avoid campaign limits.

"We told you so," Lederman said on Wednesday.

RNC also accused of funneling money in states, just not S.D.

Reports that the Hillary Victory Fund was partnering with state parties in fundraising efforts gained traction after former DNC Chair Donna Brazile's 2017 book included an explanation about the joint fundraising agreements with the state parties.

The 2016 presidential election was the first one impacted by the 2014 McCutcheon decision, in which the U.S. Supreme Court declared that the contribution limit for a person donating to federal candidates, parties and PACs in a two-year election cycle was unconstitutional. That paved the way for individuals to write large checks to joint fundraising committees that hasn't been seen in previous elections.

Following the 2016 election, the FEC received complaints about both the Hillary Victory Fund and President Donald Trump's Trump Victory committee.

The liberal nonprofit American Democracy Legal Fund filed a complaint with the FEC alleging that the Trump Victory committee, the Republican National Committee and 21 state parties funneled millions of dollars to the RNC to support Trump. The complaint does not include South Dakota.

On the other side of the aisle, the pro-Trump PAC Committee to Defend the President filed a complaint with the FEC alleging that the Hillary Victory Fund, the DNC and 38 state parties funneled money to the DNC, which then contributed those funds to the Clinton campaign. South Dakota was listed as one of the 38 states where this took place.

More:S.D. Dems say Clinton PAC transfers are 'how presidential campaigns work'

The FEC attempted to join the two complaints into one investigation into both Clinton and Trump's committee finances. But Weintraub closed both complaints in May, writing in a statement that Republicans blocked the investigation.

She noted that the Supreme Court justices, in the McCutcheon decision, discounted the FEC's warning that it would allow millions of dollars to flow unchecked through joint fundraising committees and the result is now "the systematic circumvention of individual contribution limits" by both Democrats and Republicans.

State Democratic parties transferred 80% of their joint fundraising to the DNC and more than $80 million was transferred from people who had already reached their limits for contributions to the DNC. State Republican parties transferred 90% of their joint fundraising to the RNC and more than $27 million was from people who had already reached the contribution limit to the RNC, according to Weintraub.

The FEC's investigation into Clinton and Trump's joint fundraising committees had the potential to shed light on the "schemes" that are now allowed by the Supreme Court's McCutcheon decision, Weintraub wrote. The risk of corruption increases by allowing wealthy donors to circumvent contribution limits with large checks to joint fundraising committees, she wrote.

"These presidential joint fundraising committees have eviscerated the individual contribution limits," she wrote. "And both sides will continue doing it so long as Republican FEC commissioners refuse to stop them."