source: Washington Post
Agents Contact Sister After Ex-Aide's Claims
By Henri E. Cauvin
Washington Post Staff Writer
Saturday, February 7, 2009; Page A01
Michael S. Steele, the newly elected chairman of the Republican National Committee, arranged for his 2006 Senate campaign to pay a defunct company run by his sister for services that were never performed, his finance chairman from that campaign has told federal prosecutors
Federal agents in recent days contacted Steele's sister, a spokesman for Steele said yesterday.
The claim about the payment, one of several allegations by Alan B. Fabian, is outlined in a confidential court document. Fabian offered the information last March as he was seeking leniency for himself during plea negotiations on unrelated fraud charges. It is unclear how extensively his claims have been pursued. Prosecutors gave him no credit for cooperation when he was sentenced in October.
Steele spokesman Curt Anderson said he did not know what information the federal agents were seeking, but he dismissed Fabian's allegations as patently false. "It's from, what, a convicted felon? And it has no substantiation in fact," he said.
Fabian's claims emerge as Steele begins his new role at the RNC, where he oversees the raising and spending of hundreds of millions of dollars in party money. The former Maryland lieutenant governor has faced questions about his handling of campaign money in prior elections and was twice fined for missing filing deadlines.
The recent allegations outlined four specific transactions. In addition to the payment to Steele's sister, Fabian said that the candidate used money from his state campaign improperly; that Steele paid $75,000 from the state campaign to a law firm for work that was never performed; and that he or an aide transferred more than $500,000 in campaign cash from one bank to another without authorization.
The bank transfer was made against the explicit wishes of other Maryland Republicans, who had hoped to use it to support the campaigns of state legislators, said aides to Steele and former governor Robert L. Ehrlich Jr.
The U.S. attorney's office inadvertently sent the confidential document, a defense sentencing memorandum filed under seal, to The Washington Post after the newspaper requested the prosecution's sentencing memorandum.
U.S. Attorney Rod J. Rosenstein declined to comment. Fabian could not be reached, and his attorney, James Wyda, declined to comment.
According to the filing, Wyda gave prosecutors "documents supporting [the] allegations." Wyda wrote in the memorandum that the government declined to credit Fabian for cooperating "presumably because its investigation is ongoing."
The Post corroborated some details of Fabian's claims through public records and interviews with former staff workers. Other details were disputed by people involved in the transactions.
In one of his allegations, Fabian points to a February 2007 payment by Steele's Senate campaign of more than $37,000 to Brown Sugar Unlimited, the company run by Steele's sister, Monica Turner. Campaign finance records list the expense as having been for "catering/web services." Turner filed papers to dissolve the company 11 months before the payment was received.
Turner, a doctor and the former wife of Mike Tyson, declined yesterday to describe any services she provided to the campaign. "Ah, it's the 'sabotage Michael Steele' story," she told a reporter before closing the door of her home in Potomac. "No, I'm not with that program. . . . I'm not going to do this."
Anderson, Steele's spokesman, said Turner "did a lot of media stuff" for the campaign. He later provided a copy of an invoice for nearly $15,000 for catering services for one event in October 2006 and for another in July 2007. The invoice was dated December 2006, a discrepancy Anderson said was a typographical error.
Federal election law permits a candidate's family members to be paid for work on a campaign. Any compensation must be for actual services and must be at a fair market rate.
In a separate allegation, Fabian described the bank withdrawal. After the 2006 election, an aide transferred the funds that had been raised for Steele's lieutenant governor campaign -- more than $600,000 -- out of what had been the campaign's bank account.
Fabian characterized the transfer as improper because the aide lacked signatory authority over the account. Anderson said it was appropriate because Steele had authorization and the aide was acting on his behalf.
Either way, the transfer strained relations between Ehrlich and Steele.
The money had been raised for Steele in concert with Ehrlich. Much of it, in fact, had been brought in by Ehrlich's team, said a senior Republican fundraiser and as well as a former Steele aide, each speaking on condition of anonymity because of the sensitivity of the matter.
Because Steele had decided to run for Senate rather than state office, Ehrlich wanted to turn the money in Steele's state account over to the state party for distribution to legislators, the sources said.
But Steele, who was keeping open the option for a run for governor in 2010, wanted to keep the money in his own account, the sources said. After installing a new treasurer, he had the money transferred to solidify his control, the sources said.
"I think it's fair to say the Ehrlich folks weren't happy," Anderson said. "That's all internal political stuff, but there's no legal angle."
Ehrlich did not respond to messages yesterday seeking comment.
In another allegation, Fabian claimed that payments to two vendors in 2006 for work on the Senate campaign were made from Steele's state account rather than from his federal coffers.
Campaign finance reports show that printers billed the Senate campaign late in 2006. The state campaign paid the bills early the next year -- nearly $30,000 to GOP Shoppe and almost $8,000 to Form Masters. The Senate campaign reported several months later that it had been billed in error.
Anderson said any payments from the state campaign were for services related to his state office. Brian Harlin, owner of GOP Shoppe, said it is common for candidates to move invoices from one campaign committee to another after discovering billing errors.
It is a violation of federal campaign finance regulations for a candidate to use funds raised for a state campaign to pay for expenses associated with a federal campaign.
Fabian also alleged that Steele paid the law firm Baker & Hostetler $75,000 for services that were not provided. The expenditure is listed in campaign finance records as an in-kind contribution to the state Republican Party.
Baker & Hostetler attorney Michael Braden, a former chief counsel for the RNC, said the payment was for services he and other attorneys at the firm provided in challenging legislative redistricting in Maryland in 2002.
The state party paid Braden's firm more than $60,000 between June 2002 and December 2003 to cover "redistricting legal fees," and Braden said the subsequent $75,000 was to cover the balance for the firm's work. Such late payments are not unusual, he said.
None of the people interviewed by The Post said they had been contacted by federal agents, and it is difficult to evaluate the extent of the government's inquiry.
In addition, the allegations came from a person who hoped to benefit by trading on the information. Fabian, 44, was sentenced to nine years in prison for swindling millions of dollars from businesses and banks. Prosecutors alleged that a series of frauds totaled almost $40 million.
In the memorandum, Wyda asked the court sentencing his client to "consider Mr. Fabian's willingness to assist the government and, if necessary, to testify against a prominent Maryland Republican and rising star on the national stage as evidence of his good character and efforts to redeem himself."
Over the years, money trouble has been a persistent problem for Steele. His first race for public office, a 1998 bid for the Republican nomination for state comptroller, ended nearly $35,000 in debt, much of it to his sister. He was fined twice by state officials for missing deadlines to file campaign finance reports and was in debt and had faced foreclosure in 2001, the year before he was selected as Ehrlich's running mate. The state party threw Steele a financial lifeline, awarding him an unusual $30,000 consulting contract.
Staff writers Aaron C. Davis, Matthew Mosk, Katherine Shaver and John Wagner and staff researcher Meg Smith contributed to this report.
Agents Contact Sister After Ex-Aide's Claims
By Henri E. Cauvin
Washington Post Staff Writer
Saturday, February 7, 2009; Page A01
Michael S. Steele, the newly elected chairman of the Republican National Committee, arranged for his 2006 Senate campaign to pay a defunct company run by his sister for services that were never performed, his finance chairman from that campaign has told federal prosecutors
Federal agents in recent days contacted Steele's sister, a spokesman for Steele said yesterday.
The claim about the payment, one of several allegations by Alan B. Fabian, is outlined in a confidential court document. Fabian offered the information last March as he was seeking leniency for himself during plea negotiations on unrelated fraud charges. It is unclear how extensively his claims have been pursued. Prosecutors gave him no credit for cooperation when he was sentenced in October.
Steele spokesman Curt Anderson said he did not know what information the federal agents were seeking, but he dismissed Fabian's allegations as patently false. "It's from, what, a convicted felon? And it has no substantiation in fact," he said.
Fabian's claims emerge as Steele begins his new role at the RNC, where he oversees the raising and spending of hundreds of millions of dollars in party money. The former Maryland lieutenant governor has faced questions about his handling of campaign money in prior elections and was twice fined for missing filing deadlines.
The recent allegations outlined four specific transactions. In addition to the payment to Steele's sister, Fabian said that the candidate used money from his state campaign improperly; that Steele paid $75,000 from the state campaign to a law firm for work that was never performed; and that he or an aide transferred more than $500,000 in campaign cash from one bank to another without authorization.
The bank transfer was made against the explicit wishes of other Maryland Republicans, who had hoped to use it to support the campaigns of state legislators, said aides to Steele and former governor Robert L. Ehrlich Jr.
The U.S. attorney's office inadvertently sent the confidential document, a defense sentencing memorandum filed under seal, to The Washington Post after the newspaper requested the prosecution's sentencing memorandum.
U.S. Attorney Rod J. Rosenstein declined to comment. Fabian could not be reached, and his attorney, James Wyda, declined to comment.
According to the filing, Wyda gave prosecutors "documents supporting [the] allegations." Wyda wrote in the memorandum that the government declined to credit Fabian for cooperating "presumably because its investigation is ongoing."
The Post corroborated some details of Fabian's claims through public records and interviews with former staff workers. Other details were disputed by people involved in the transactions.
In one of his allegations, Fabian points to a February 2007 payment by Steele's Senate campaign of more than $37,000 to Brown Sugar Unlimited, the company run by Steele's sister, Monica Turner. Campaign finance records list the expense as having been for "catering/web services." Turner filed papers to dissolve the company 11 months before the payment was received.
Turner, a doctor and the former wife of Mike Tyson, declined yesterday to describe any services she provided to the campaign. "Ah, it's the 'sabotage Michael Steele' story," she told a reporter before closing the door of her home in Potomac. "No, I'm not with that program. . . . I'm not going to do this."
Anderson, Steele's spokesman, said Turner "did a lot of media stuff" for the campaign. He later provided a copy of an invoice for nearly $15,000 for catering services for one event in October 2006 and for another in July 2007. The invoice was dated December 2006, a discrepancy Anderson said was a typographical error.
Federal election law permits a candidate's family members to be paid for work on a campaign. Any compensation must be for actual services and must be at a fair market rate.
In a separate allegation, Fabian described the bank withdrawal. After the 2006 election, an aide transferred the funds that had been raised for Steele's lieutenant governor campaign -- more than $600,000 -- out of what had been the campaign's bank account.
Fabian characterized the transfer as improper because the aide lacked signatory authority over the account. Anderson said it was appropriate because Steele had authorization and the aide was acting on his behalf.
Either way, the transfer strained relations between Ehrlich and Steele.
The money had been raised for Steele in concert with Ehrlich. Much of it, in fact, had been brought in by Ehrlich's team, said a senior Republican fundraiser and as well as a former Steele aide, each speaking on condition of anonymity because of the sensitivity of the matter.
Because Steele had decided to run for Senate rather than state office, Ehrlich wanted to turn the money in Steele's state account over to the state party for distribution to legislators, the sources said.
But Steele, who was keeping open the option for a run for governor in 2010, wanted to keep the money in his own account, the sources said. After installing a new treasurer, he had the money transferred to solidify his control, the sources said.
"I think it's fair to say the Ehrlich folks weren't happy," Anderson said. "That's all internal political stuff, but there's no legal angle."
Ehrlich did not respond to messages yesterday seeking comment.
In another allegation, Fabian claimed that payments to two vendors in 2006 for work on the Senate campaign were made from Steele's state account rather than from his federal coffers.
Campaign finance reports show that printers billed the Senate campaign late in 2006. The state campaign paid the bills early the next year -- nearly $30,000 to GOP Shoppe and almost $8,000 to Form Masters. The Senate campaign reported several months later that it had been billed in error.
Anderson said any payments from the state campaign were for services related to his state office. Brian Harlin, owner of GOP Shoppe, said it is common for candidates to move invoices from one campaign committee to another after discovering billing errors.
It is a violation of federal campaign finance regulations for a candidate to use funds raised for a state campaign to pay for expenses associated with a federal campaign.
Fabian also alleged that Steele paid the law firm Baker & Hostetler $75,000 for services that were not provided. The expenditure is listed in campaign finance records as an in-kind contribution to the state Republican Party.
Baker & Hostetler attorney Michael Braden, a former chief counsel for the RNC, said the payment was for services he and other attorneys at the firm provided in challenging legislative redistricting in Maryland in 2002.
The state party paid Braden's firm more than $60,000 between June 2002 and December 2003 to cover "redistricting legal fees," and Braden said the subsequent $75,000 was to cover the balance for the firm's work. Such late payments are not unusual, he said.
None of the people interviewed by The Post said they had been contacted by federal agents, and it is difficult to evaluate the extent of the government's inquiry.
In addition, the allegations came from a person who hoped to benefit by trading on the information. Fabian, 44, was sentenced to nine years in prison for swindling millions of dollars from businesses and banks. Prosecutors alleged that a series of frauds totaled almost $40 million.
In the memorandum, Wyda asked the court sentencing his client to "consider Mr. Fabian's willingness to assist the government and, if necessary, to testify against a prominent Maryland Republican and rising star on the national stage as evidence of his good character and efforts to redeem himself."
Over the years, money trouble has been a persistent problem for Steele. His first race for public office, a 1998 bid for the Republican nomination for state comptroller, ended nearly $35,000 in debt, much of it to his sister. He was fined twice by state officials for missing deadlines to file campaign finance reports and was in debt and had faced foreclosure in 2001, the year before he was selected as Ehrlich's running mate. The state party threw Steele a financial lifeline, awarding him an unusual $30,000 consulting contract.
Staff writers Aaron C. Davis, Matthew Mosk, Katherine Shaver and John Wagner and staff researcher Meg Smith contributed to this report.
