Money, Politics, and Cuba

The Federal Election Commission has a few questions for an influential Miami political action committee

As national political action committees go, the Miami-based Free Cuba PAC is not among the very rich. While PACs affiliated with some big industry groups and labor unions pour millions of dollars into political campaigns each election, the Free Cuba PAC invested a modest $106,000 in campaign contributions during the 1999-2000 election cycle, according to records published by the nonprofit Center for Responsive Politics in Washington, D.C.

But in the realm of so-called single-issue PACs, Free Cuba is among the most powerful. Compared with the other dozen or so PACs in the United States dedicated to advancing a foreign-policy agenda (this again is data from the Center for Responsive Politics, which classifies political action committees according to general areas of interest), Free Cuba has been the biggest spender by far during the two most recent election cycles and already has given $28,000 this year to seven candidates in the upcoming 2002 elections.

In the past few years, however, Free Cuba has not been able to shake increased scrutiny by the Federal Election Commission (FEC). Not only has Free Cuba been months late in filing all but one of its required financial disclosure reports for 1999 and 2000, but the reports contain a number of discrepancies and errors. An FEC spokesman is constrained by law from revealing if the commission is in the process of investigating Free Cuba's compliance with campaign-finance laws. During the past two years, though, Free Cuba's treasurer, Mario L. del Valle, has received at least ten telegrams and letters from the commission warning of a possible audit or enforcement action or both.

The attention from the FEC comes at the same time a number of dramatic events have stirred Miami's anti-Castro community and its most influential and wealthy representative, the 21-year-old Cuban American National Foundation, now officially renamed the Jorge Mas Canosa Freedom Foundation. The Free Cuba PAC is a parallel organization to the foundation, which also operates a Washington lobbying organization. It's a complex setup, mainly for tax purposes, but the same affluent group of Cuban exiles has always been the guiding force behind the organizations. Members of the foundation's board of directors have traditionally been the largest source of financial contributions to the Free Cuba committee.

Under federal tax laws and campaign-finance laws, however, the nonprofit, tax-exempt foundation and the political action committee must conduct their business as separate entities. "A tax-exempt organization should not engage in any political activities," affirms U.S. Internal Revenue Service spokesman Michael Dobzinski, who cannot discuss specific organizations or what the IRS takes into account when considering whether they're truly distinct. Nor can Dobzinski release any information about an audit of the foundation conducted by the IRS about a year ago. By several accounts the audit turned up no evidence of wrongdoing.

It was following that audit, according to foundation attorney George Fowler, that the venerable anti-Castro group legally changed its name to the Jorge Mas Canosa Freedom Foundation and the name of its Washington, D.C., lobbying branch from the Cuban American Foundation to the Cuban American National Foundation, "just so there would be no confusion between the two names," Fowler explains. "It was just a suggestion from the IRS that came out during the course of the audit." (There also was the Miranda matter: Last May, during the name changes, the foundation's incorporation lapsed with the Florida secretary of state and disgruntled former foundation director Mario Miranda appropriated the name, declaring he had "saved" the foundation. The organization now is suing Miranda for trademark infringement and other alleged transgressions.)

Perhaps it was in an effort to distance the Free Cuba PAC from the foundation that Mario del Valle, not a foundation director until last July, took over as the Free Cuba treasurer in 1998. Two months ago del Valle changed the PAC's address to his home address on Key Biscayne. Earlier PAC addresses had been the same as the businesses of several foundation directors. Del Valle, a BankAtlantic executive, is married to Clara del Valle, a prominent long-time foundation director and member of the Bacardi family of rum fame. (While several Bacardi executives and family members are generous donors to the Free Cuba PAC, the Bacardi corporation's own political action committee has been virtually inactive during the past two years.)

The recipients of Free Cuba donations are the same politicians -- more or less evenly divided between Democrats and Republicans -- who advance the generally hard-line foundation Cuba-policy agenda. Many of the biggest beneficiaries, such as Connecticut Sen. Joseph Lieberman and Rep. Patrick Kennedy of Massachusetts, share long-standing friendships with foundation leaders. In 1999, for instance, former Congressman Joe Kennedy was elected to the board of MasTec, the giant construction firm headed by foundation chairman Jorge Mas Santos.

Events during 2001, however, seem likely to affect the source of Free Cuba's income, if not the thrust of its giving. Last year the foundation, under the direction of 38-year-old Mas Santos, began an overhaul of its image, widely believed to have suffered badly in the wake of the Elian Gonzalez affair. The foundation hired new media-savvy officers, feted then-vice presidential candidate Lieberman in what many exiles considered a blasphemous endorsement of the Clinton administration that sent Elian back to Cuba, wrote and promoted federal legislation to support dissidents inside Cuba, and helped bring the Latin Grammy Awards to Miami (even though the show, which includes Cuba-based musicians as award nominees, eventually reneged on its Miami commitment, fearing violent protests from local anti-Castro activists).

Then in July and August, amid growing internal dissatisfaction, about two dozen of the approximately 150 directors resigned to protest the new direction in which Mas Santos was leading the foundation. The departing directors were among the organization's oldest and richest. Radio host and long-time foundation spokeswoman Ninoska Perez Castellon was the first big name to resign (though she's not one of the elders). She and most of the other ex-directors have now formed their own organization, the Cuban Liberty Council. Perez says the group "probably" will form a political action committee in the future, but for now she believes the former foundation directors "might contribute [to political campaigns] as citizens, not through the [Free Cuba PAC]." If indeed the ex-directors abandon the Free Cuba committee, it could suffer the loss of tens of thousands of dollars annually.

For the moment the PAC has some past financial issues to resolve. A new administrative-fines program approved by Congress in 1999 establishes a streamlined process for the Federal Election Commission to financially punish candidates and committees who file late disclosure reports. Since the program began in July 2000, the commission has collected a total of almost $426,000 in fines. The process is so streamlined, in fact, that a visitor to the commission's Website (www.fec.gov) with basic information about a late filer can calculate on the spot the probable amount of a fine. Yet the Free Cuba PAC, despite its habitual tardiness and numerous reminders to that effect from the FEC, has not been fined as of this past Monday. But it's doubtful the commission is ignoring Free Cuba. FEC spokesman Ian Stirton flatly declares: "You will get fined if you report late."

About a year ago, correspondence from the FEC to the Free Cuba PAC began to indicate more concern over not just late reports but their content as well.

On March 15, 2000, the commission asked treasurer del Valle about the PAC's almost nonexistent administrative costs reported (this actually is not a new concern of the FEC, judging from correspondence over the past several years) and about a refund of a contribution from the PAC to Rep. Joe Kennedy (who left Congress in 1999). Free Cuba told the FEC the Kennedy campaign gave back a $2500 donation, while Kennedy reported refunding $2000.

As for the PAC's low administrative costs, FEC records show Free Cuba has filed amended disclosure forms that include previously unreported bank charges but nothing in the way of rent or personnel costs. Analyzing the administrative costs of an unquestionably small operation may seem to be nitpicking, but those expenses (or lack thereof) can assume larger legal significance. For the FEC's purposes, it is important to document who pays the bills. The Free Cuba PAC is classified as "nonconnected," meaning it's not affiliated with any other organization or corporation. A nonconnected political action committee is free to accept donations from anyone, whereas "affiliated" PACs -- so-called separate segregated funds -- can raise money only from their parent corporation's executives and stockholders. The sponsoring corporation also picks up its PAC's administrative expenses. A nonaffiliated or nonconnected committee pays its own overhead.

"The assumption is that all [political action] committees have administrative expenses, so if administrative costs aren't reported, it raises several possibilities," observes Lawrence Noble, executive director of the Center for Responsive Politics and former general counsel to the FEC. "One, the committee is a separate segregated fund affiliated with another organization which is paying their expenses; two, it's just not reporting [its administrative costs]; or three, somebody else is paying the expenses, in which case that is considered a campaign contribution, which, if it's from a corporation, is prohibited; if from an individual, it applies against the limits on personal campaign contributions, and if it's from a foreign national, it's illegal." Correspondence currently posted on the FEC Website doesn't indicate if the commission's current queries have been resolved.

Another set of questions is prompted by the Free Cuba PAC's financial-disclosure reports covering the election cycle 1999-2000. For one thing the reports were filed quite late. Both the 1999 year-end (due January 31, 2000) and the 2000 April quarterly (due April 15, 2000) reports arrived at the FEC mailroom on October 16, 2000. (To the FEC a "late" report is filed within 30 days of its due date; anything after that is considered to have been "not filed" at all.) The reports were seriously overdue despite the commission having repeatedly advised treasurer del Valle in writing of the consequences of ignoring FEC deadlines and requests for information. In a letter dated June 2, 2000, in fact, an FEC analyst seems to acknowledge that Free Cuba was already under surveillance. The letter from Lisa J. Stolaruk of the Reports Analysis Division reminds del Valle that the 1999 year-end and 2000 first-quarter reports still hadn't come in, and adds, "Notwithstanding any matters which may be pending before the commission, any additional report which is not submitted in a timely manner by your committee may result in the commission initiating legal enforcement or audit action."

Additionally it turns out the PAC's original pre- and postelection itemizations of contributions received and disbursed are largely inaccurate. Some of the problem may be careless record-keeping. For example, on its post-general election 2000 report, filed more than a month late, the PAC lists a $2000 contribution it made on November 2, 2000, to "Victory PAC." With no further identification, it's impossible to tell where the money went. "There are a lot of small committees that make a lot of mistakes, but that's not an excuse," Noble asserts. "Sometimes they work with volunteer help and that can be sloppy, but the problem is they have obligations under the law, so they shouldn't be allowed to get away with sloppiness."

But is it mere carelessness when the Free Cuba PAC omits large chunks of important data in its disclosures? When the committee finally submitted its first-quarter 2000 report on October 16 (shortly before the November 7 election), only two donations from the PAC to political candidates were listed. Neither contribution had been reported to the FEC by the recipient, an understandable omission in at least one case, since the donation went to a nonexistent candidate. The PAC indicates it contributed $1000 to "Andre for Congress" on February 7, 2000. Wherever that check ended up, it's doubtful it went to the committee to elect Andre Elvin Dean of Bryan, Texas, to the U.S. House. That committee was disbanded in 1998, when Dean lost his Republican primary. The other contribution Free Cuba lists for that quarter is $1000 to U.S. Sen. Charles Schumer. But the senator's own records don't show any receipts from the Free Cuba PAC in the past four years.

It wasn't until almost six months after the election and a year after the disclosure due date, on April 24, 2001, that the Free Cuba PAC reported seven more campaign contributions totaling $9500, made during the first quarter of 2000. These went to real candidates, including George W. Bush ($5000 on March 23) and Florida Republican Rep. Clay Shaw ($1000 on March 28). But curiously, del Valle neglected to disclose another $5000 contribution made on February 16, 2000, to "Pete's PAC," the committee formed by New Mexico Republican Sen. Pete Domenici. Although Domenici promptly reported the contribution, it didn't appear on the Free Cuba disclosure forms until July 18, 2001, when the committee filed a second amended report. (Mario del Valle did not return calls seeking comment for this story.)

Two months later, in its amended October 2000 quarterly report, the PAC disclosed more previously unreported donations it had received more than a year earlier -- a whopping $20,000. The money came from well-known figures, including sugar barons José and Alfonso Fanjul ($2500 each) and retired Univision executive Raul Toraño ($5000) and wife Maria Teresa Toraño ($4500). Raul Toraño would donate another $500 in September 2000, putting him over the $5000 calendar-year limit on donations to a political action committee. Another generous couple, Juan and Marta Gutierrez of Toms River, New Jersey, gave $5100 each to the PAC during 2000. (Juan Gutierrez is a foundation director.)

So almost none of the donations received by the Free Cuba Political Action Committee came to light until long after the hotly contested 2000 elections. And many large contributions from the PAC to federal candidates, including the current president, were omitted from the committee's itemized reports and only revealed in amendments made public much later. That, of course, defeats the purpose of federal campaign-finance laws. "The purpose of disclosure is to give voters a look at the money candidates and committees take in and how they spend it," says the FEC's Ian Stirton. "Whether it makes any difference or not, certainly the intent was to have timely disclosure, especially of time-sensitive reports. It's no good, for example, having a preprimary report filed after the election."

When calculating late fines, the commission takes into account many factors and increases fines if time-sensitive reports are involved. "The FEC takes pre-election reports very seriously," says ex-FEC counsel Lawrence Noble, "and if a committee keeps pushing them past the election, it's a problem. The first question is: Why didn't they want these contributions reported before the election?"

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