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Wednesday, September 21, 2011

Jefferson Smith paper trail leads into dense thicket

Our doubts about Portland mayoral candidate Jefferson Smith continue to nag us -- his cheerleaders at WW notwithstanding. We've been wondering how this guy has been paying his mortgage, since he doesn't appear to have had a job in the world of commerce since he jumped or fell from the Stoel Rives law firm in 2003.

Smith's occupation since then has been... wait for it... community organizer. He's the founder, and has served as an officer, of a much ballyhooed organization known as the Bus Project, whose mission in life is to get young people involved in politics. It seems benign enough, but we thought we'd get out the public records of the Bus Project's finances, and see if we could figure out where the money comes from and where it goes.

What we discovered is quite a tangled mess that makes it awfully difficult to figure out how big of a tap Smith has been inserting into the organization's money keg. And we're seeing several other issues that leave us scratching our head.

First of all, from what we can tell from the Oregon secretary of state's website, there is no organization that is actually named the Bus Project. There are in fact three entities who operate under the "Bus" banner, but the real names of two of them are something else. First, there's a nonprofit organization that classifies itself as a section 501(c)(3) entity -- a tax-exempt charity for federal income tax purposes. Its real name is Oregon Progress Forum, and it operates under the assumed business name Bus Project Foundation. Second, there's a public benefit corporation that classifies itself as a tax-exempt section 501(c)(4) organization. Its real name is New Progressive Network, and it operates under the assumed business names Bus Project and Oregon Bus Project. The third entity is a political action committee known as Bus PAC.

The three entities are obviously related. Caitlin Baggott, the president of the 501(c)(4) (succeeding Smith there in April of this year), is also a director of the PAC, as well as the executive director of the 501(c)(3). Mariana Lindsay, the secretary of the 501(c)(4), is listed with the state as an "alternate transaction filer" for the PAC.

Sloppiness with money and bookkeeping is immediately apparent in the financial disclosures of the PAC. It's been paying thousands of dollars in fines to the secretary of state's office for violations of the state's campaign finance laws. The state has brought 10 penalty cases against Bus PAC since 2004, and an SOS staff member in Salem characterizes the PAC as a well known "repeat offender." Not only is it chronically late in reporting its campaign finance activities, but in May 2010 the PAC also had to "adjust its books" by $13,558 that it couldn't account for. The fines in the 10 cases total $4,956, most of which was assessed in just the last 13 months; the largest penalty, $1,356, was assessed in February of this year.

Another fact that jumps out of the PAC's financial disclosures is that there's money flowing back and forth between the PAC and New Progressive Network, the 501(c)(4) organization. By our amateur calculations, in the time since the secretary of state's Orestar campaign finance reporting network has gotten up and running in late 2006, the PAC has reported paying the 501(c)(4) organization about $93,500, and reported as receiving back from the 501(c)(4) contributions totaling about $50,000.

There's doubtlessly a story behind the circular cash flow, but some of the Orestar entries are baffling. Lately there have been several instances in which the PAC has reported paying thousands of dollars to the 501(c)(4), and receiving the same amount as a contribution back from the 501(c)(4) on the same day. If this were a mature political organization, we'd just assume that this was some sort of standard industry practice. Certainly we're not expert in campaign finance maneuvering. But given that these are organizations founded and run for a long time by Smith -- who will drive a car on a suspended license if it suits him -- one wonders whether something untoward is going on in made-up paper transactions like those.

We'll take a look at the section 501(c)(3) "charity" tomorrow. There are some really touchy tax issues there, because 501(c)(3)'s, unlike 501(c)(4)'s and PACs, aren't allowed to get too involved in supporting political campaigns. And at least for some period of time, there's been only one big old joint Bus website for the 501(c)(3) and the 501(c)(4), on which contributions are also solicited for the PAC. That's some seemingly dangerous turf there.

In any event, to cut through the chase to the ending, after slogging through various mounds of documents, it's still not possible for us to figure out exactly how much Smith was actually paid by the Bus entities. Maybe it was substantial, maybe it was modest. It may not be all that much. But from what's been filed with secretary of state and the IRS, we can't tell what it was. And so the questions remain: Who is this guy, really? And how does he pay his living expenses?

UPDATE, 9:00 p.m.: We just noticed that in addition to the $13,558 "balance adjustment" for which it was penalized in 2010, the PAC had a $21,913 "balance adjustment" in January 2007, for which no penalty was imposed by the state. That's a lot of money to lose track of.

UPDATE, 9/22, 5:20 p.m: Followups here and here.

Comments (36)

Nice work Jack. Keep at it. You are doing the work that the press refuses to do.

Good job, Jack. Most of us don't have the skillset to go after things like this. And you are doing a far better job than the lapdogs masquerading as news reporters.

Well, now we know what Smith has been using his lawyer background for since leaving Stoel Rives -- creating byzantine organizational structures and finance schemes.

Jack, you could also be teaching an investigative journalism class.

You could substitute "Oregon Taxpayers United" for all the "Bus Project/Progressive Network names in there. It's like deja vu all over again.

Amazing work: part-time blogger does more in a few hours than a full-time reporter does in weeks! (years?)

Smith sure isn't workin' for a living!
You know there was another Jefferson Smith at the turn of the 19th century, Jefferson "Soapy" Smith. Quite the grifter this Jefferson Smith. He started out in Colorado and eventually ended up in Skagway Alaska at the end of the gold rush days. He literally ran the town with a posse of enforcers.
He go the nick name Soapy because one of the first his many scams was to auction his home made soap. He stuffed $100 bills in the wrappers and "auctioned" these special bars off to his cohorts in the crowd, most of whom were all hoping to get something for practically nothing. The first few bars of soap got sold to Soapy's men and then the rest of the crowd would go on a buying frenzy. Of course there were no $100 bills in those bars of soap! When the crowd got tired or mad Soapy would pack up his wares and move on to the next little town to do the same all over again. Eventually he made lots of money in prostitution and gambling. He was shot and killed in Skagway, Alaska.
I wonder if this modern day Jefferson Smith is any relation to the infamous Jefferson "Soapy" Smith.

On 9/12 & 13 I noted that several PACs in Clackamas County were doing the same thing. "..what is the purpose for each PAC giving the others $5k? Why not just keep their own money rather than pass it back and forth?" This isn't accidental and it does not make financial sense so there must be some other reason - possibly hiding contributors' names? I will be interested to see the answer to this question.

It is very possible Jefferson will regret that he opened this door to run for council.
Would he not have thought about these matters Jack has been writing about?

Thanks Jack. I'm sure that the ACLU, Kroger, Brown, the Unions and the IRS will follow up on your exploratory endeavor. They sure did for Sizemore, and correctly so.

Well done, sir. Valuable info.

Jack is doing the work that the other lazy left wing rags like blueoregon and the oregonian are too scared lazy and afraid to do and report.

I did a little searching and the only person I could find that was paid by any of those three "non-profit" organizations is Jefferson Smith. And only by the New Progressive Network.

In FY09 they paid him $32,498 plus $817 in "other" compensation.

In FY10 they paid him $33,336.

You're spoiling my post for tomorrow!

"In FY09 they paid him $32,498 plus $817 in "other" compensation.

In FY10 they paid him $33,336."

Man, he's getting wealthy off of this thing!!!!!!

There is nothing wrong with being Brash, Underhanded, and Sneaky (BUS) as long as you pontificate progressive patter.

I gave them a few hundred dollars in 2010...before I concluded that the youth vote is dangerous, and brought us up close and personal with the unqualified disaster that is the Obama administration. (..."oh, but I was so much older then, I'm younger than that now...").

Funny, I stopped listening to radio because I couldn't stand hearing Bush's voice. Now I dislike Obama's voice even more, if that's possible.

getting wealthy off of this thing

I think maybe he already is wealthy. Like Sten, another trust fund baby who wants to rule the world.

Why I will probably never again contribute to the Bus Projects of the world..


Written the year I was born.

As someone who has been involved with the Bus Project from the start, I find your inferences and implications about Jeffeerson Smith and the Oregon Bus Project unfounded. I have seen their work first-hand, and it is wholly in the public interest. And that is Jefferson's Smith's passion, believe it or not.

Why not ask some real questions about the Bus Project's work, politically through its PAC, and voter registration and Politicorps through its 501-c-3?
Jack Bog, you're not interested in uncovering truth, only in making suggestions about people getting rich, suggestions which are way off base.
There must be 20 organizations in the state of oregon who operate PACs, 501-c-4s and 501-c-3s and have to make the proper reporting, complicated as it might be. These organizations are, as they say, on both sides of the aisle.

And when their leaders run for elected office, I will look at them quite carefully.

No one's accusing Smith of getting rich off the Bus Project. I'm curious as to where his money comes from, and that's what got me started on this. Others of his supporters tell me today that he inherited it from his mother.

But you're missing the real news in this post: the discovery that the Bus PAC either can't or won't comply with state law, is making five-figure "cash balance adjustments" on its books over funds that it can't account for, and is paying thousands of dollars in penalties. That is eye-opening in and of itself, and not every Bus donor is going to be pleased to find out about it.

I'll let others judge the value of the Bus Project's work. As I wrote, signing up young people to vote sounds noble. But the slant here seems more than a little partisan, which to me makes it just another political group. In this case, Democratic Party and pro-government employee union.

I distrust people who work as "community organizers" and have no other visible means of support.
Having been involved in neighborhood organizations for years I've seen that ordinary citizens can organize themselves to do good things in the public interest and at the same time hold down a real job.

Yep, "Our Oregon" is a 501(c)4. Great bunch of folks, always looking out for the public employee unions. The Bust Project is just more of the same.

Ron, I think there are important questions being asked here, but let me see how you address them. First, there's the question of impropriety in the Bus's filings with the state, which include late filings (breaking state election law), $13,558 in "unaccounted" expenditures from its PAC (also a violation of state election law), and co-mingling of the 501(c)(3), 501(c)(4), and PAC (violation of state and federal law, if I'm not mistaken).

The problem as I see it with this first set of issues is not that these three entities exist: as you stated, dozens of organizations are set up this way. The problem is that these entities broke the law -- both through late filing and shoddy accounting practices, as well as through improper contribution solicitation through a single website. OLCV, in contrast, operates several independent websites for their (c)(3), (c)(4), and PAC. Rules are rules, and even with what I believe to be an important mission (engaging young voters in the democratic process and promoting progressive candidates around the state), the Bus Project has to follow those rules like everyone else.

The second issue, which I imagine will be covered in more detail tomorrow, is going to require some serious explaining on Jefferson's part. Why was he bringing in a $33k salary as a board member (the only publicly listed involvement he's had over the past several years) when no other board members -- including the chair, vice-chair, and treasurer -- have received a salary? Why is he being paid out of the 501(c)(4) and not the PAC? There could be very good explanations for these questions, but it's important that they be answered truthfully, and I for one am thankful that there are still watchdogs (albeit, somewhat amateurish) in the journalism community that are holding our elected officials accountable.

*That being said, the "Smith -- who will drive a car on a suspended license if it suits him" line was a bit of an ad hominem, Jack, so be careful where you tread there.

Jack, you know that Ron Buel was the founding editor and publisher of Willamette Week, right? I am sure that he will never admit that Willy Week has become a joke of a publication. Just making sure you have a scorecard for the players.

He "inherited money from his mother." Is that mother his biological mother Suzanne Peck or are we talking about his stepmother Meredith Woods Smith who is the current head of the Oregon Democratic Party?

Jefferson Smith has all the right connections:

1. Ivy League degree

2. Family heavily entrenched in politics

3. Supposed relation as "the great-great-great grandnephew of Joseph Smith, founder of Mormonism." According to wikipedia.

What part of Progressive and meritocracy am I not seeing? The Daley family has run Chicago since Richard J. Daley was elected mayor in 1955 and now his youngest son, William M. Daley is President Obama's Chief of Staff.

Obama came out of Chicago. I presume he was handpicked and groomed by then Mayor of Chicago Richard M. Daley.

Don't get me started on the Kennedy's and Massachusetts. Massachusetts loves to be ruled by blue bloods living and breeding in Martha's Vineyard.

As for the Smith family in Oregon, if Jefferson gets elected as mayor, then expect him to try and copy the Daley's and Kennedy's progressive brand of nepotism.

Is this the same Smith family that gave us Gordon Smith?

The Bus Project (c4) and the Bus Project Foundation (c3) do have two separate websites.



BTW, "promoting progressive candidates" is not a permissible purpose or function of an organization described in section 501(c)(3), and as I understand it, it cannot be the primary function of a 501(c)(4), either.

The Bus Project (c4) and the Bus Project Foundation (c3) do have two separate websites.

We'll write more about that tomorrow.

a bit of an ad hominem

For a member of the state bar to have his driver's license suspended, then defy the suspension and drive anyway, and then engage in driving behavior that gets him stopped and convicted of driving while suspended -- sorry, that's quite relevant to his fitness for office, and it may explain the compliance problems that his organization seems to be having.

This not so young, not terribly wunderkind would be way! more interesting if he were related to Soapy Smith instead of Joseph! ...IMO
The c3 and c4 so called non profit organs seem to generate money to support all sorts of things that do not seem to be for the greater good in our society. The amount paid to Mr. Smith is not as important, as the principles of following the letter and the spirit of the laws. If he has received this money unlawfully, it matters not if it is 3 dollars, or 3 million dollars.

Jack, I'm not trying to suppose that his driving history bears no relevance on his fitness for office (though I will say to me they seem fairly minor), but the way your declaration was phrased was borderline personal. If that's how you prefer to write, I'm not about to stop you (disclaimer: I'm not a Jefferson supporter) but I also don't think it carries as much journalistic integrity as more objective statements of fact. I understand that this is a blog and not conventional print media so the rules are more opaque, I just prefer political discussions that avoid character attacks (even if it means sacrificing some brevity).

In regards to the activities legally permissible under a 501(c)(4), resources can go to political campaigns and elections, so long as it is not the primary purpose of the entity (read: less than 50% of the 501(c)(4) money). The trouble is, it's often difficult to quantify the exact amount being dedicated to those purposes, especially when they use the "balls and cups" technique of shuffling money between entities. Best of luck doing those calculations!

Finally, though two distinct websites exist for the umbrella Bus organization, the Bus Project site makes no declaration of which entity contributions are going to (though presumably it's the PAC). Which begs the question, how does the 501(c)(4) get its money (author's note: after completing this comment, I realize a portion comes from the Onward Oregon site)? This is where the "money flowing back and forth between the PAC and New Progressive Network, the 501(c)(4) organization" comes into play. Now there's nothing that jumps out as inherently illegal in that process alone, but it does lead me to wonder: if Jefferson is taking home $33K/year from the (c)(4), and the (c)(4) is gifting back serious money to the PAC, just how much of its money is going to decidedly political purposes? Then there's the other sub-entity inside the New Progressive Network: Onward Oregon. After a quick perusal of the website (http://onwardoregon.org/), its activities appear to be entirely political: online political petition gathering/sending.

Now I'm no accountant or auditor, but from what I've seen so far these questions that you're raising, Jack, are well founded, indeed.

You know you need sleep when: you use "brevity" when you mean "levity."

At least 3 Dem House guys had offices in the Bus Project building during last (or penultimate?) legislative session. Not sure if this means anything... but there you have it. Tobias, Jeff, and Jules. And their support staff.

I consider Jeff a close friend and I was involved in the early days of the bus project's founding. I know he did not get paid from the bus project for many years. It was not until the project was established that he finally began drawing any pay. And that was probably well under $30k annually but I do not know for certain.

The guy works his tail off to get people involved, to vote, and to care about their state and its government. I think that is a admirable (not all of us can be tax professors Jack Bog...I keed...I keed).

I am not intimately familiar with his finances but from our conversations I have gathered that in his high school and college years his ambition was to make money and that he did; some shrewd investing allowed him to make a decent nest egg that can sustain one that keeps his living expenses low.

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