Mellow campaign checks made out to 'cash' raise questions

Over the past nine years, state Senate Minority Leader Robert J. Mellow's chief campaign committee paid more than $188,000 in checks made out to "cash," without disclosing who received the money and, in many cases, exactly what the money was used for - despite a state election law that specifically calls for complete disclosure.

"The payments to cash" - an issue not unique to the Archbald Democrat, although his committee has issued by far the most checks to "cash" of any committee statewide - raise questions about the state's ability and interest in enforcing the state campaign finance law, as well as in whose pockets contributions ultimately wind up.

The law's purpose is to ensure the integrity of the election process through a fully transparent process that identifies both contributors and beneficiaries of campaign funds.

Neither Secretary of State Pedro A. Cortes, who is charged with overseeing the law, nor Gov. Ed Rendell, who appoints the secretary of state, would directly answer questions about the practice.

Mr. Mellow refused numerous requests by telephone and in person to discuss the subject, including telephone calls and in person. He turned on his heel and walked away from a reporter when confronted about the subject at a recent local appearance. Instead, his press secretary referred all questions to Sal Cognetti, a leading local attorney who has represented several public officials on criminal and civil matters.

Mr. Cognetti asserted in an e-mail that Mr. Mellow's committee has complied with the law but would not explain how checks made to cash met the requirement of the campaign finance law's explicit language.

A Times-Tribune request for vouchers to back up the payments to cash resulted, more than two months later, in copies of the front of checks. Mr. Cognetti refused to provide checks older than three years nor did he or the campaign provide copies of the backs of the checks, which would have shown who endorsed them and received the cash.

Campaign law

Section 1626, paragraph (b) of the Pennsylvania Campaign Finance Reporting Law explicitly states that campaign finance reports "shall include the following information: … each and every expenditure, the date made, the full name and address of the person to whom made and the purpose for which such expenditure was made."

Despite that, Department of State officials said payments to cash have not been viewed as violations in the past, citing a 2006 audit of Mr. Mellow's campaign funds that raised no concerns about the practice.

"I think what's happened is we've always looked at that as like a petty cash, if you will, and it's small amounts. You know, now, obviously, small amounts over a long period of time can add up," said Harry A. VanSickle, deputy secretary of administration who oversees the Bureau of Commissions, Elections and Legislation. Reminded one check was for almost $2,500, he said flatly, "No, that's not a violation."

But department officials said only a department inquiry initiated by a complaint from someone outside the department could definitively determine if specific payments to "cash" such as Mr. Mellow's were a violation.

The Mellow campaign listed on its campaign finance forms 88 payments as "petty cash" since 2000 totaling $5,682.90, only 3.02 percent of the total. Most were for his Peckville or Harrisburg offices, according to finance reports.

Mellow leads pack

Across the state, dozens of candidate, party and interest-group political action committees have made payments written to "cash" more than 1,600 times since Jan. 1, 2000, but Mr. Mellow led the pack by doing it 533 times, according to a Times-Tribune search of the Department of State's online database of campaign finance reports and review of finance reports available in Lackawanna County records but not listed on the state database. Mr. Mellow's payments totaled $188,464.89. Almost another 800 payments by other committees were written to "petty cash" with 269 of those for $100 or less, 499 between $100 and $1,000, and 15 above $1,000.

Progressive Agenda, a group active in Philadelphia's elections in 2007, made one payment to cash for $143,000 in May 2007, describing it as "Election Day cash" without explaining who received the money, according to the state online database.

Efforts to reach the group were unsuccessful.

Neither his campaign finance reports nor documents provided by Mr. Mellow's committee show who actually received his campaign's payments to cash.

But in dozens of cases among campaign committees across the state, candidates did name a recipient if they made a payment to cash.

One example was Daniel Naylor, a Benton Twp. Republican who ran locally for state representative of the 114th Legislative District in 2002.

In 2001, his campaign made two payments to cash, money that ended up with his wife, Laureen, who is identified as the recipient in his campaign finance report, according to the online database. They totaled $150.53 and were to reimburse her for paper products for an ice cream social and for decorations and drinks.

"I wanted people to know who got the money," he said. "I think it's important that people can look at a campaign finance report and say 'OK, this is where the money went.' "

Mr. Naylor had one other cash payment, $100, whose recipient he did not identify. It is listed as a filing fee. He said that was for a money order to register his campaign with the Bureau of Elections.

Too little detail

Many of the payments are listed on Mr. Mellow's campaign finance reports as "reimbursements for expenses" or "travel" with too little detail to determine what the money was spent on.

In all, Mr. Mellow's committee spent more than $2.92 million from Jan. 1, 2000 to Oct. 19, 2009, meaning the committee has not reported who received roughly 6.45 percent of its expenditures, or about $1 of every $15.50 it spent.

Friends of Bob Mellow is unsually cash rich. Mr. Mellow's committee began 2000 with more than $487,000, and raised more than $3.42 million since then, leaving it with a balance of $988,507.57 as of Oct. 19. Mr. Mellow had opposition in 2002, a race he won by a 2-to-1 margin, but he ran unopposed in 2006. He has contributed hundreds of thousands of dollars to other political action committees.

Instead of allowing Mr. Mellow to be interviewed or furnishing the documentation that would answer questions about who received the proceeds from the checks made out to cash, Mr. Cognetti accused The Times-Tribune of having "an agenda" to "get Bob Mellow."

"In 2006, the Department of State audited the campaign finance reports and records of Bob Mellow and was satisfied with the results," Mr. Cognetti said in an e-mailed statement. "Its conclusion disproves your allegations."

2006 audit

The 2006 audit actually found the campaign fell short in meeting reporting requirements in five instances, although it did not flag any of the 27 payments to "cash" dated in the audited period. Those 27 payments, which totaled $6,499, ranged from a $50 tip for a waitress at Mr. Mellow's outing that summer to $975 for unspecified travel. The audited period did not reflect the other 506 checks made out to cash in amounts of up to $2,486.90.

The audit, done by Huber & Associates of Harrisburg, focused on the campaign spending from June 6 to Nov. 27, 2006.

Neither the accounting firm that did the audit nor the Secretary of State's office would specifically reconcile how checks made out in large amounts of cash could conform to the explicit language of the law.

Richard J. Huber, owner of Huber & Associates, referred all questions to the Department of State, which in turn referred back to the audit as proof that the payments to "cash" were permissible.

Question 'cash'

Accounting experts contacted by The Times-Tribune said they would have questioned payments to "cash."

Stanley Baiman, Ph.D., the Ernst & Young professor of accounting at the Wharton School of the University of Pennsylvania, one of the nation's top-ranked business schools, said auditors who see a cash payment would typically ask for receipts showing who received the money and if it was used for its stated purpose.

He said he found it "a little strange" that the auditors didn't raise questions about the payments to cash in the audit.

"The auditors should also be making sure of compliance with the law," he said.

Sandra C. Vera-Munoz, Ph.D., an associate accounting professor and KPMG Faculty Fellow at the University of Notre Dame, said the auditor who examined some of Mr. Mellow's campaign finance reports might have decided the amount of checks written to cash did not add up to enough money to warrant concern. But checks written to "cash" should "raise a flag, absolutely" because it fails to show who was paid, she said.

"If you pay a vendor or pay an employee, you write the name of the vendor or the name of the employee or whoever it is," Dr. Vera-Munoz said.

Despite repeated requests, Ms. Amoros refused to make Mr. Cortes available for an interview.

Instead, Ms. Amoros arranged an interview with Mr. VanSickle and Sherry J. Messimer, chief of the Division of Campaign Finance/Lobbying Disclosure, who, she said, were the most knowledgeable about campaign finance procedures.

Mr. VanSickle cited the audit as proof the Mellow campaign did nothing wrong, despite the language of the law. If the "cash" payments were wrong, the firm would have flagged them, he argued.

"The auditors accepted that," Mr. VanSickle said, referring to the payments to "cash."

Policy lacking

Ms. Messimer said the department has no written policy for writing checks to "cash." A review of court rulings for the relevant section of the law by The Times-Tribune showed state and local courts have not addressed the issue.

Unlike Pennsylvania, laws in other states, including California and New York, make allowances for paying with real cash, provided the amount spent is $100 or less. Payments totaling more than $100 may not be made in cash and then laws require all recipients to be identified.

Mr. Mellow's committee made 175 payments of less than $100. Two-thirds of payments to cash reported by Mr. Mellow's committee - 358 of the 533 - were for amounts greater than $100. Twenty of those were for $1,000 or more.

Roman Porter, executive director of the California Fair Political Practices Commission, which oversees the state's campaign finance reporting, said a payment to "cash" on a campaign finance report would get the attention of supervising officials.

"They would have to explain what the expenditure was" and who received the payment, he said, adding that the law requires disclosure to discourage the expenditure of campaign funds for personal use.

Jeff Brindle, executive director of the New Jersey Election Law Enforcement Commission, said his commission would look into the reporting of a payment made to "cash" without a further explanation.

"All I can say is in our situation that would be something that we would take a look at ... because our law requires the specific reason and recipient," Mr. Brindle said.

Barry Kauffman, executive director of Common Cause Pennsylvania, said the law is quite clear. It requires campaign committees to disclose the names of those who receive money from campaign expenditures and detail what the money is used for, he said.

"Cash, I don't know how he can justify at all," he said of Mr. Mellow's . "The intent of the campaign finance disclosure law is to demonstrate precisely how your money is expended and to verify that it is expended for the purpose of influencing the outcome of a campaign."

Mr. Kauffman said he was surprised the Department of State considers payments to "cash" allowable.

"If that is the operational standard, then we have a flashing red light that it is time to change the law," he wrote in an e-mail. "If this interpretation prevails and is not remedied, campaign accounts will become nothing more than the 21st century version of the old paper sacks that fat cats used to stuff with money and throw through the transoms of lawmakers' hotel rooms in the old days."

Attorney Lawrence M. Otter, who has represented numerous candidates on election matters, including 2006 Green Party Senate candidate Carl Romanelli, agreed the payments to "cash" do not meet the state law's requirement for specifics. Mr. Mellow, a trained accountant, "ought to know better," he said.

"When you go over $100, I want to know what you're spending it on," Mr. Otter said. "It still begs the question where the hell did the $180,000 go? There may be an innocent answer to all this, but I think it certainly leaves him open to criticism."

Contact the writer: bkrawczeniuk@timesshamrock.com