Campaign finance watchdog files FEC complaint against Liam Madden for funneling donations through family

Campaign finance watchdog files FEC complaint against Liam Madden for funneling donations through family
Liam Madden speaks during VTDigger’s debate between U.S. House Republican primary candidates in June 2022. File photo by Glenn Russell/VTDigger

Nearly three months after failed congressional candidate Liam Madden described live on the radio a self-funded scheme to inflate his campaign fundraising numbers, a nonprofit campaign finance watchdog group has filed a complaint against the Republican nominee with the Federal Election Commission.

In the 30-page complaint filed on Tuesday, attorneys from the Campaign Legal Center ask that the FEC investigate Madden and “seek appropriate sanctions for any and all violations,” including civil penalties and injunctive relief “to remedy these violations and prohibit any and all future violations.”

In late October, less than two weeks before he lost to Democrat Becca Balint in the open race for Vermont’s lone seat in the U.S. House, Madden appeared on WVMT’s live talk radio program “Morning Drive.” Asked by hosts to respond to critics’ scrutiny of Madden’s campaign finance filings — particularly a $5,300 donation reportedly made by his toddler son — Madden said he “drained” his wife’s business’s bank account, distributed roughly $25,000 among family members, then directed his family members to donate the money to his campaign. 

Madden then recouped the money by collecting a salary from his campaign, he said at the time. He said he made the moves to inflate his campaign fundraising totals and thus meet fundraising requirements to qualify for a primary election debate.

“So I basically just made some legal loopholes happen to be resourceful to actually get into the debates, which helped me win the primary,” Madden told the “Morning Drive” hosts.

Upon hearing Madden’s on-air admission in late October, Saurav Ghosh, director for federal campaign finance reform for the Campaign Legal Center, told VTDigger that the maneuver was “so blatantly illegal” and fit the “textbook definition” of a straw donor scheme.

Ghosh and his Campaign Legal Center colleague Roger Wieand are now leading the complaint filed with the FEC, the federal government body that enforces campaign finance law. Ghosh previously worked for five years in the FEC’s enforcement division.

“What Mr. Madden acknowledged doing on this radio program is what’s called a straw donor scheme, and it’s one of the fundamental ways in which election transparency is undermined,” Ghosh told VTDigger on Wednesday. “When you take money from one source and funnel it into a campaign through family members, you’re essentially denying voters accurate information about who’s supporting your candidacy. So what I hope the FEC does is move forward very quickly and resolve this case … and send the message that this is clearly illegal.”

Ghosh and Wieand allege that Madden violated three federal campaign finance laws. First, they allege he misrepresented the true source of his campaign funds by using a straw donor scheme. Second, they suggest Madden violated federal law banning corporate contributions to candidates, via his wife’s business. And third, they allege that Madden misrepresented his reported “staff” payments in his campaign finance filings, when they were in fact reimbursements to his wife’s business.

In an interview with VTDigger on Wednesday, Madden said he found it “confusing” why the Campaign Legal Center would spend the time and resources to file a complaint against him. The $25,000 in question is “a trifling amount of money for an election,” he said, and the entire affair “is such an insignificant thing.”

“I think it’s silly and I think it clearly did not affect the outcome of the election,” Madden said. “Becca Balint raised more on the first day of her election. She called people she knew; she was able to make phone calls and get $125,000. I spent a year and I raised less than $40,000. Like, why the fuck is anyone bringing this up?”

Ghosh agreed that, in the world of campaign finance law violations, $25,000 is a relatively small amount. “What’s at issue here is really the legal principle that election transparency matters,” he said.

“These laws exist for a reason,” Ghosh said. “So when you see someone explicitly violate the law, and then essentially brag about it as a kind of clever move, I think that requires legal response.”

The relatively small dollar amount, and Madden’s low profile, are exactly why Ghosh thinks the FEC may take up Madden’s case and take enforcement action — a rare move for a politically hamstrung government body.

“I think the FEC often deadlocks on controversial cases, or cases that involve high-profile elected officials, individuals who are in the limelight,” Ghosh said. “The fact that Mr. Madden’s scheme involves a relatively small amount of money, and the fact that he didn’t actually get elected, these are all factors that suggest that the FEC will actually take action here. Because there’s really only one issue at stake, and that is vindicating the federal laws that Mr. Madden’s conduct violated.”

Since his actions were first called into question, Madden has maintained that he didn’t know he was breaking the law. In late October, he sent his own letter to the FEC, saying, “It has come to my attention that I may have misinterpreted FEC rules and violated them inadvertently.”

If he thought he had committed wrongdoing, Madden told VTDigger on Wednesday, he “wouldn’t be sharing it so flagrantly and publicly.” Instead, he said, “I did not try to hide shit.”

“If I thought I was breaking the rules, I wouldn’t have done it in the first place, and I certainly wouldn’t have been so open,” Madden said.

Madden has not retained an attorney, and he predicted that the FEC “is going to look at this and come to the opinion that I currently have: either, ‘This is a waste of our time,’ or some extremely nominal fine.”

Madden also said he suspects more is at play.

“Why are they so concerned about this irrelevant campaign, irrelevant candidate, irrelevant amount of money? It seems like they’re … punching down,” Madden said. “I would think that there’s some motivation other than actually trying to achieve anything of public impact here.”

Asked what he suspects that motivation could be, Madden was at a loss: “I have no idea, but it just doesn’t make sense to do this from so many levels.”

Madden won the Republican nomination for Vermont’s lone U.S. House seat in an upset primary victory in August. A self-proclaimed independent, Madden continuously railed against America’s political systems, including a campaign finance system riddled with dark money and unlimited super PAC spending.

Since his own campaign finance case first made news in October, Madden has also consistently noted that his general election opponent, Balint, benefited from high-dollar donations and hundreds of thousands in super PAC spending. Super PACs can’t donate directly to or coordinate with candidates, but they can spend an unlimited amount of money to run advertisements or disburse campaign materials that benefit their chosen candidate. This is legal under federal campaign finance law and court precedent.

Asked how he squares Madden’s political rhetoric with his actions, Ghosh told VTDigger on Wednesday, “There’s certainly an irony there.”

“I’m mindful of the fact that super PAC spending is certainly marginalizing the voices of ordinary voters. It’s not a good thing for our democracy,” Ghosh said. “But yes, there’s an irony that the candidate who ran on that platform and made a point of pointing out his opponent’s super PAC support actually committed a more egregious violation of campaign finance laws than anything his opponent appears to have done.”

Over the course of her campaign, Balint accepted at least $26,100 in direct contributions from allies of Sam Bankman-Fried, the now-disgraced executive of the cryptocurrency exchange FTX. Bankman-Fried himself and his brother donated to Balint, and to the Vermont Democratic Party. And Bankman-Fried’s close ally, fellow FTX executive Nishad Singh, in July donated $1.1 million to the LGBTQ Victory Fund, a super PAC, which then spent nearly $1 million on a flood of pro-Balint advertisements just before her heated Democratic primary race against former lieutenant governor Molly Gray. Balint has maintained that she did not have contact with Bankman-Fried or his associates.
Bankman-Fried is now facing federal fraud and campaign finance charges. Prosecutors allege he stole cash from cryptocurrency customers in order to fund his own large political donations in several federal races. They also allege that he instructed friends and colleagues to donate money in their name, on his behalf, in order to evade contribution limits — another alleged straw donor scheme.

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