Did Mr. Ward
learn how to do this,
learn how to do this,
from a few people in
Oklahoma ?
Oklahoma ?
NRCC Says Ex-Treasurer
Diverted Up to $1 Million
By Paul Kane
Washington Post Staff Writer
Friday, March 14, 2008; Page A01
The former treasurer for the National Republican Congressional Committee diverted hundreds of thousands of dollars -- and possibly as much as $1 million -- of the organization's funds into his personal accounts, GOP officials said yesterday, describing an alleged scheme that could become one of the largest political frauds in recent history.
For at least four years, Christopher J. Ward, who is under investigation by the FBI, allegedly used wire transfers to funnel money out of NRCC coffers and into other political committee accounts he controlled as treasurer, NRCC leaders and lawyers said in their first public statement since they turned the matter over to the FBI six weeks ago.
"The evidence we have today indicated we have been deceived and betrayed for a number of years by a highly respected and trusted individual," said Rep. Tom Cole (R-Okla.), the NRCC chairman.The committee also announced that it has submitted to banks five years' worth of audits and financial documents allegedly faked by Ward, some of which were used to secure multimillion-dollar loans. It is a violation of federal laws to obtain loans through false statements; the crime is punishable by up to $1 million in fines and 30 years in prison.
Before yesterday, the committee, which raised $49 million in 2007, had not acknowledged that any money was missing. It announced on Feb. 1 that it had discovered "irregularities" that might involve fraud, dismissed Ward and called in federal investigators.
Robert K. Kelner, a lawyer with Covington & Burling, which has been hired to oversee an internal forensic audit, told reporters he is certain only that Ward had made "several hundred thousand dollars" in unauthorized money transfers since 2004. However, he said, the year-end report filed with the Federal Election Commission (FEC) in 2006 overstated the NRCC's cash on hand by $990,000.
That may be the upper level of what Ward allegedly skimmed from NRCC coffers, Kelner said. But the total will not be known until forensic auditors finish "drilling down" to determine how much money might have been misappropriated and how much may be missing as a result of sloppy bookkeeping, he said.
Kelner said Ward was the only NRCC official empowered to use wire transfers to shift money into any account without a second approval. After transferring the money into accounts he controlled, often for dormant fundraising committees associated with the NRCC, Ward allegedly moved it into accounts for his political consulting business or his personal bank accounts, Kelner said.
Kelner said the NRCC has had no contact with Ward since he was fired on Jan. 28. Ronald Machen, Ward's attorney, declined to comment on the investigation yesterday, as did the FBI.
The Washington Post reported Thursday that Ward had served as treasurer for 83 GOP committees this decade. In the past five years, the committees took in more than $400 million in contributions.
Rep. Peter T. King (R-N.Y.) told The Post this week that Ward paid himself $6,000 from King's PAC in 2007 after the congressman thought he had closed down the committee.
Politico.com reported last night that Ward lent himself more than $4,200 from the political action committee of Rep. Jeb Hensarling (R-Tex.), an unusual expenditure for a campaign treasurer to make. Ward repaid the money early last month, after the FBI was called in to investigate his work at the NRCC, Politico.com reported.
According to a source familiar with the investigation, some of those committees were closed down in filings to the FEC but their accounts were left open at banks. That would have allowed Ward to divert money into their coffers and then to his political consulting firm or his personal bank accounts.
Kelner said the NRCC had not met with its outside auditors for nearly five years, describing that as unusual. Rep. Greg Walden (Ore.), who previously served as chairman of the NRCC's audit committee, said he had asked to meet with the outside auditing firm, Deloitte & Touche, and that the fake audits were almost perfect forgeries.
"I sought for several years to meet with the outside auditors," Walden said. "There was always some seemingly legitimate reason why that didn't happen." The scheme began to unravel this year, when Rep. K. Michael Conaway (Tex.), the new head of the audit committee, insisted on meeting the auditors.
The magnitude of the alleged fraud staggered Republicans, who are bracing for the final accounting from the forensic audit in six to eight weeks. Many said they expect a total far greater than the minimum cited yesterday.
The largest confirmed political fraud in the modern campaign finance era, after a 1974 law set strict contribution limits, is believed to be the embezzlement of $1 million from the 1992 presidential campaign of the late Sen. Paul Tsongas (D-Mass.).
Cole told reporters yesterday evening that the NRCC has spent about $370,000 on the audit being conducted by Kelner's firm and accountants from PricewaterhouseCoopers, draining precious dollars from a campaign committee that has badly trailed its Democratic counterpart in fundraising for more than a year.Kelner said federal election and banking laws, which require proof that such frauds were done "knowingly," are likely to put the legal burden on Ward and not the NRCC. He said the internal probe so far has turned up no signs of "anybody else colluding with" Ward.
Washingtonpost.com staff writer Ben Pershing and Washington Post staff researcher Madonna Lebling contributed to this report.
The National Republican Congressional Committee said Thursday that its former treasurer, Christopher J. Ward, may have embezzled hundreds of thousands of dollars from the committee, but GOP sources said the total lost by the NRCC and other Republican committees could be as high as $1 million.
The NRCC said that Ward made "several hundred thousand dollars in unauthorized transfers of NRCC funds to outside committees whose bank accounts he had access to, including joint fundraising committees in which the NRCC participated. He also appears to have made subsequent transfers of several hundred thousand dollars in funds from those outside committees to what appear to be his personal and business bank accounts."
These joint committees from which Ward allegedly diverted funds include special committees set up to raise money for an annual dinner with President Bush put on by the NRCC and the National Republican Senatorial Committee. Those dinners usually meant millions of dollars for the Republican campaign committees.
One GOP insider said Ward also diverted funds from the leadership PACs and re-election campaigns for which he worked, usually in smaller amounts, although the insider said the total taken from those PACs and campaigns may actually end up being greater than the losses suffered by the NRCC itself.
NRCC Chairman Tom Cole and Rob Kelner, a lawyer with Covington & Burling retained by the NRCC to oversee its response to the accounting scandal, said the transfers go back at least until 2004, but that the NRCC is still unsure how much was diverted from committee coffers.
"The exact dollar figures are currently a moving target, and as the investigation progresses, it is entirely possible that these figures will change, either by increasing or decreasing," the NRCC said. "The forensic investigation has also noted numerous instances in which the unauthorized transfers were either not accurately reported, or were not reported at all, on FEC reports."
A GOP source said that, in some cases, Ward cut checks, in small amounts, from a lawmaker’s campaign or leadership PAC directly to his own bank account. At other times, the sources said, Ward used a dummy company as a go-between, but the money finally ended up in his account.
The source said that Ward issued a $4,208 check to himself in December from Rep. Jeb Hensarling’s (R-Texas) PAC, although he returned that money in early February, after the NRCC accounting scandal became public.
Ronald C. Machen, an attorney with WilmerHale in Washington who is representing Ward, did not reply to an e-mail seeking comment.
The NRCC has brought in PricewaterhouseCoopers to conduct a forensic audit. Cole estimated that the investigation into the accounting problems has already cost the committee between $360,000 to $370,000, and he acknowledged the internal audit was far from complete.
So far, the NRCC has decided to file a new FEC disclosure statement for January 2008 stating that it had $740,000 less cash on hand than previously reported. The NRCC's actual cash on hand at the end of January was $5.7 million, not the $6.64 million it reported to the FEC, the committee says.
While it's possible that the committee could face FEC fines for misreporting its financial data, Cole said he didn't think such punishment was warranted.
"Our working relationship with the FEC has been very good," Cole said. "We were the victims here."
Kelner, who said the committee has been cooperating fully with an FBI investigation into the matter, said he was "not aware of any reason why the NRCC should have legal exposure, particularly because the committee has been very aggressive in disclosing what it knows to the appropriate law enforcement authorities."
The NRCC said Thursday that, after becoming treasurer in 2003, Ward "submitted to the NRCC's bank and to the NRCC leadership bogus audit reports for 2002, 2003, 2004 and 2005. The additional bogus audit was submitted to the NRCC's bank for 2006."
The NRCC also said there was a $200,000 discrepancy in the NRCC's line of credit, meaning the committee owed more than it thought it did. It is unclear if the NRCC believes that Ward was responsible for this discrepancy.
The NRCC made disclosures to members and to the media Thursday because the committee's new treasurer, Keith A. Davis, filed a notice alerting the FEC that auditors had discovered significant discrepancies in the funds officially registered with the FEC.
In a briefing for reporters, Kelner said the figures released Thursday do not represent the final tally of misreported funds, nor are the auditors certain that all of the missing money was misappropriated. Some of the missing funds may be the result of real accounting errors, not malfeasance, he said.
"That number is going to vary over time," Kelner said. "How much of that variance is due to misappropriation and how much of it is due to accounting errors is not really something that we can say with confidence."
Cole said in a statement that the evidence gathered to date shows that "we have been deceived and betrayed for a number of years by a highly respected and trusted individual. From the moment we learned that bogus financial statements had been submitted to the bank on our behalf, we took decisive and speedy action by contacting the FBI, which opened a criminal investigation."
He said that the NRCC is making "every effort . . . to prevent such a fraudulent act from happening again.”
Members say they did not suspect that Ward was doing anything out of the ordinary during his tenure as treasurer.
"I had no reason to suspect there was a problem," said Rep. Greg Walden (R-Ore.), who chaired the NRCC's audit committee during some of the years when Ward allegedly produced fake audits. "No one raised a red flag."
Still, Walden said he tried on numerous occasions to set up a meeting with the committee's outside accountant -- he believed it was Deloitte & Touche -- but that Ward repeatedly delayed. At one point, Walden said he approached then-Chairman Tom Reynolds (R-N.Y.) to get Ward to set something up, but that Ward called back immediately to complain that members of the accounting firm weren't returning his calls.
"There was always a reason," Walden said about Ward's excuses for not setting up a meeting.
NRCC officials say they discovered the allegedly "bogus" audits only after Texas Rep. Mike Conaway (R), a registered certified public accountant who chairs the committee's audit committee, pushed Ward repeatedly to give him a copy of an audit for 2006. Only then did Conaway and others start to realize the full scope of the alleged misdeeds.
Members briefed on the matter said that Ward attempted to submit a fake audit on a phony letterhead, but that the ruse was quickly discovered
"This is, unfortunately, not that unusual a scenario," Kelner said of the NRCC’s accounting problems. Numerous campaign committees have been the victims of embezzlement or other financial crimes over the last decade.
Ward, who had sole oversight of the committee's bookkeeping, was apparently acting alone, Kelner said. Since discovering the financial irregularities, the NRCC has altered its rules so that multiple people must sign off on all major expenditures.
"In hindsight, it would have been better to have better controls that might have averted this," Kelner said. He pointed out, however, that political committees and other non-profits often have less rigorous internal controls than corporations and other private businesses do.
Investigators working for the NRCC have been in contact with Ward since his ties with the committee were cut, but Kelner said the former treasurer has not provided them with any major breakthroughs in the probe.
"We are seeking information from Mr. Ward," Kelner said. "At this point in time, we haven't learned anything from Mr. Ward that has affected the investigation in one way or another."
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