Crain's Detroit Business on Phil Hart Club's Secret Account

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"Untraceable cash spills into governor's race," by Chad Livengood, 7/31/18

Three of the leading candidates to be Michigan's next chief executive have benefited from large sums of cash that can't be followed to their original sources because of federal laws allowing not-for-profit organizations to influence elections outside of the state's campaign finance law.

Former state Sen. Gretchen Whitmer's campaign for the Democratic nomination for governor has been aided by $550,000 in untraceable donations from two entities that don't appear to exist in public records.

Attorney General Bill Schuette's bid for the Republican nomination in next Tuesday's primary also has been boosted by $1.2 million in donations flowing from two so-called "dark money" front organizations that can legally conceal the identities of their donors.

Matuzak, a lobbyist for the American Federation of Teachers and Democratic political operative, did not respond to questions about what kind of legal entity controls the bank account that wrote the $250,000 check to the pro-Whitmer group.

And Lt. Gov. Brian Calley got $1.3 million of free advertising through a TV commercial promoting his work with Gov. Rick Snyder turning around Michigan's economy that was paid for by a Snyder-led group that doesn't have to disclose its funding sources.

he undisclosed cash has become a hot issue in next Tuesday's Democratic primary, where former Detroit health department director Abdul El-Sayed is waging a campaign against what he calls Whitmer's "corporate dark money PAC."

In Whitmer's case, an organization called Build a Better Michigan that aired $1.8 million on TV ads for her benefit received a $300,000 donation from the Progressive Advocacy Trust in East Lansing and $250,000 from the Philip A. Hart Democratic Club in Mt. Clemens.

Those donations to the pro-Whitmer group have fueled questions from her Democratic opponents as to whether those mystery entities are operating for the sole purpose of concealing corporate money from a big business like Blue Cross Blue Shield of Michigan, which has allied with Whitmer but not made a traceable donation to her bid to be governor.

"Build a Better Michigan is nothing but a shell for dark money PACs and unlimited money from corporate CEOs who have interest in a Whitmer-led Michigan," said Adam Joseph, spokesman for El-Sayed. "There is only one reason these corporations and secretive groups are shelling out thousands of dollars to try and get Gretchen Whitmer elected: they want to keep their privilege in a Whitmer administration."

A spokesman for Whitmer declined Tuesday to comment.

But whether Blue Cross Blue Shield played any role in helping bankroll the pro-Whitmer group Build a Better Michigan is a lingering question the state's largest health insurance company won't answer.

A spokeswoman for Blue Cross declined to answer direct questions from Crain's about whether the insurer has donated corporate funds to either the Progressive Advocacy Trust or the Philip A. Hart Democratic Club in the past two years.

"BCBSM has no comment," said Helen Stojic, director of corporate affairs for Blue Cross.

Separately, the Blue Cross political action committee donated $42,500 to Schuette's campaign, while executives at the insurance company held a fundraiser for Whitmer in March at the Firebird Tavern in Detroit that attracted 200 attendees and generated $144,710 for Whitmer's campaign coffers — her biggest fundraiser of the year.

But the Blue Cross PAC has reported no direct donations to Whitmer's campaign or Build a Better Michigan. Stojic declined to explain the strategy behind the PAC's donations.

'Huge gaping hole' in election law

The Philip A. Hart Democratic Club's donation to Build a Better Michigan cannot be traced in public records and disclosures, in part, because the entity doesn't appear to exist in state or federal corporation records.

There is a federal PAC called the Philip A. Hart Democratic Club that runs bingo games to generate money to fund political activities and shares the same address as the Macomb County Democratic Party. But the club's federal PAC didn't have enough money on hand in June to donate $250,000 to the Whitmer group, records show.

"The Phil Hart Democratic Club made a contribution to the Build A Better Michigan fund from Club funds in an account different from the federal PAC," the club's president, Julie Matuzak, said in a statement to Crain's.

Matuzak, a lobbyist for the American Federation of Teachers and Democratic political operative, did not respond to questions about what kind of legal entity controls the bank account that wrote the $250,000 check to the pro-Whitmer group.

When asked whether the group received a donation from Blue Cross, Matuzak replied: "The PHDC (has) never received any corporate money."

There's no record of a separate not-for-profit organization registered under the same name of Philip A. Hart Democratic Club — named after the mid-20th Century U.S. senator from Michigan — with either the Internal Revenue Service, the Michigan Department of Licensing and Regulatory Affairs or the state Bureau of Elections. The group dissolved a state PAC in 2002, records show.

Progressive Advocacy Trust also is not registered with the IRS as a political organization, but is listed in the pro-Whitmer group's financial disclosure as the "administrative account" of the Ingham County Democratic Party. Whitmer represented Ingham County for 14 years in the Legislature and for six months in 2016 as an interim county prosecutor.

Both groups are operating under a "huge gaping hole" in the law that exempts them from disclosing their spending activities or existence because they're affiliated with a county political party, said Craig Mauger, executive director of the Michigan Campaign Finance Network.

"They don't have to file with the IRS and they don't have to file with the state because there's a hole between the two laws," Mauger said.

Progressive Advocacy Trust is exempt from the reporting requirements of other not-for-profit organizations, spokesman Mark Fisk said.

"The Progressive Advocacy Trust chose to participate in Build a Better Michigan's effort because both organizations are non-political organizations that share similar core values," said Fisk, a Democratic political consultant with the East Lansing firm Byrum & Fisk Communications. "The PAT believes — like BBM does — that affordable health care, improving our infrastructure, making sure we have safe drinking water, and repealing the retirement tax need to be priorities."

"Once BBM began its effort in earnest, it was decided we should support it," Fisk added.

Steve Bieda