An Austin, Texas, man claimed he was raising money to help presidential hopefuls through candidate contributions and get-out-the-vote efforts.
Kyle Gerald Prall, 40, raised more than $500,000 for Democratic and Republican candidates in the run-up to the 2016 election — and spent less than a penny on the dollar on political causes, federal prosecutors say.
Instead, Prall, who in October was sentenced to three years in prison, blew through some of his windfall on travel to Belize and Miami Beach, liquor, lap dances, room service, a deep-tissue massage and even a pet-cleaning fee, they say.
His racket? He set up several political action committees (PACs), which were scams.
A Department of Justice (DOJ) official warns that more bogus committees could surface as next year's election nears.
Thousands of registered committees
There are more than 7,000 PACs registered with the Federal Election Commission (FEC) in Washington. They are created to raise and spend money to elect or defeat candidates for federal office and raise money for political parties. They are not charities, and contributions are not tax-deductible. PACs with names that sound like charities are legal if they spend money on political activity, such as donating to candidates who support the cause or pushing for legislation that does.
Sham PACs may purport to fight for Republicans or Democrats, support firefighters or help children suffering from disease. But when a con artist is at work, little to none of the contributions raked in are spent on the stated purpose.
Older Americans, many politically active, should be vigilant before writing a check or donating online, observers say.
A number of recent criminal prosecutions open a window into how bad actors operate as they collect huge sums of money, often by targeting retirees.
"If people are going to give some portion of their hard-earned dollars, they should be able to trust the candidate or political cause is going to benefit, not some shady operator,” says Brendan Fischer, director of federal reform at the nonpartisan watchdog group the Campaign Legal Center, in Washington.
The FEC requires PACs to regularly file reports detailing their spending and the full name, mailing address, occupation and employer of each contributor who gives more than $200 in a calendar year. Some swindlers collect small contributions to avoid listing donors, a practice observers say makes it harder for law enforcement to identify victims.
Legitimate PACs generally spend less than a quarter of donations on fundraising, and most of the money goes to candidates and other political efforts, says Andrew Mayersohn, a researcher at the nonprofit Center for Responsive Politics in Washington.
Scam PACs, by contrast, funnel almost nothing into political activity.
"The money primarily goes to the people who are running the PAC,” says Washington attorney Brett Kappel, a partner in government relations and public policy at Akerman LLP. “There are a large number of these out there ... prospecting, looking for retired people as potential victims."
In suburban Washington the Heroes United PAC misled donors nationwide into believing that contributions would help volunteer firefighters, says Eric Friedman, director of the Office of Consumer Protection (OPC) in Montgomery County, Maryland. The PAC has collected more than $6 million since 2017 through deceptive telemarketing solicitations, paying 90 percent of the donations to third-party vendors, Friedman says.
In October, the office entered into a settlement agreement with the PAC to stop it from soliciting county residents, but the OPC warns that the scam “could be duplicated by others."
"These deceptive business practices are a despicable way to exploit our natural desire to financially support those who risk their lives to protect us,” Friedman adds. “This and other such businesses operate as political action committees in name only and engage in first-responder fraud."
Observers say that scam PACs have been around for about 15 years and that as attorneys general in many states have shut down fake charities, some con artists have created fundraising entities that sound like charities but are actually PACs. The committees claim to represent sympathetic causes, but, according to Kappel, the bad actors behind the entities pay themselves and shell out millions for expenses, such as marketing, to companies in which they have a personal stake.
The FEC sticks to regulating candidate- and party-affiliated PACs, Kappel notes.
At the DOJ, attorney Corey Amundson is chief of the Public Integrity section, which prosecuted Prall in Texas. Amundson says the agency has been active this year pursuing alleged scammers in more than a half-dozen federal cases.
Case sparks outrage
"You don't want people to be cynical about contributing to the democratic process,” Amundson says of the negative impact of scam PACs. When donors find out that their money was used for strip clubs and beach-hotel vacations, “they rightfully are outraged."
Seniors are at risk because they tend to be more engaged in the political process, he says.
Fischer, at the Campaign Legal Center, says the DOJ has gone after the worst operators. Others skirt the law less blatantly — such as by spending 20 percent of their money on political activity— so are harder to prosecute, he says.
Amundson hopes the recent prosecutions will deter criminals but is concerned that the 2020 election will trigger more scams: “I hope it doesn't explode."
Five Tips to Avoid Scam Political Action Committees
2. Beware of a PAC if its website doesn’t have the names of the people running it and contact information.
3. Be suspicious if a PAC collects money through harder-to-trace payment sites like PayPal or requests checks mailed to a post office box.
4. Avoid a PAC that doesn’t ask a donor to confirm, as required, that he or she is they are at least 21 years old and not a foreign national.
5. Be skeptical of a group that sounds like a charity but is regulated by the FEC, since PACs are intended for political activity.