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story.lead_photo.caption A pile of dollar bills is shown in New York in this Oct. 24, 2016, file photo. (AP / Mark Lennihan )

WASHINGTON -- In debt and struggling to pay its bills, the Democratic Party of Arkansas has shored up its finances with the help of low-interest, unsecured loans from in-state lenders, according to filings with the Federal Election Commission.

The state party listed $147,039 in debts and obligations and $14,121 cash on hand in its federal account as of Dec. 31.

Much of the money is owed to Pine Bluff-based Simmons Bank, which has given the party an unsecured two-year, $60,000 loan at an interest rate of 4.97%, FEC filings show. Between Feb. 20 last year and Dec. 31, the party was able to repay $3,137.71, leaving it with a balance of $56,862.29, the party reported.

Simmons lent the party money in February 2019 even though the party had failed to pay off a previous unsecured loan from First National Bank of Jonesboro, FEC records state.

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The state Democratic Party borrowed $39,647.16 from the Jonesboro bank on May 1, 2012. The money was supposed to be repaid -- at an interest rate of 4.95% -- by April 5, 2017, FEC filings show.

More than 2½ years after the due date, the party still owed $9,693 on the loan, the FEC filing stated.

Despite failing to make any payments during 2018 and 2019, there is no indication in the filings that interest is accruing on the loan. The amount owed has remained the same, month after month, on FEC filings, despite the lack of payment.

Under federal election law, it is illegal for "any national bank, or any corporation organized by authority of any law of Congress" to make donations for federal elections.

A bank loan, however, is not a political contribution to a candidate or political committee if it is "made in the ordinary course of business."

Among other things, the loan must bear "the usual and customary interest rate of the lending institution for the category of loan involved" and it must be "made on a basis that assures repayment."

Unpaid interest is supposed to be reported by the committee to the FEC. When a bank is the lender, unpaid interest "may be considered a prohibited in-kind contribution," an FEC official said.

State Democratic Party Chairman Michael John Gray did not respond Thursday or Friday to requests from the Arkansas Democrat-Gazette for information about the loans. Earlier in the week, he answered other questions about the party's finances.

Donald Guinn, president and CEO of First National, said he couldn't say whether the information in the party's FEC report is accurate. He said he is unable to discuss a client's loan with the media.

"Anything I say or do would be divulging private information," he said. "We could not comment on any, any, any questions, issues or whatever because of those privacy regulations."

Simmons Bank public relations manager Caroline Makris did not respond to requests for comment Friday.

The Arkansas Republican Party listed no debts and cash on hand of $174,894 on its federal year-end report. It reported total receipts of $740,707 and total disbursements of $648,702.

On its federal report, the Democratic Party listed total receipts of $789,814 and total disbursements of $777,408 for the year.

A state party is required to report to the FEC expenditures made to assist presidential, House or Senate campaigns as well as any other federal activity.

(Both parties have a separate account for non-federal campaign activities. Reports for those accounts are filed with the Arkansas secretary of state's office. There is some overlap. If the state and federal party apparatus is housed in the same building, rents, salaries and certain other office-related expenses can be allocated between the two, in some instances.)

In addition to owing the banks money, the Democratic Party has failed to return some contributions in a timely manner, its FEC filing shows.

The party accepted $5,500 in prohibited corporate in-kind donations from Bylites Inc. Production Services, it told the FEC. Rather than repaying the money, the party has repeatedly listed the illegal contributions as outstanding "debts and obligations," FEC records show.

The party has repeatedly told the FEC that it also owes contribution refunds totaling $19,375 to six businesses. They are: E-Z Mart Stores Inc. of Texarkana, Texas ($10,000); Trinity Lighting Inc. of Jonesboro ($5,000); Brent Stevenson Associates of Little Rock ($1,000); DBH Management Consultants of Morrilton ($1,250); Arkansas Cancer Clinic PA of Pine Bluff ($1,000) and Baughman Co. of San Francisco ($1,125).

Last week, Gray said he's not certain when these contributions were made. They predate his election as chairman in March 2017, he said.

He did not say why the contributions needed to be returned.

Three of those entitled to contribution refunds said Friday that the party had never informed them that it owed them money.

"I'll be glad to get the refund, I can tell you that. I can always use a thousand dollars," Brent Stevenson said.

The lobbyist said he's not sure when the money was given or why it would be returned.

"I'm just at a loss, OK? It could be a typo. It could be a bad entry," he said.

Chances are somebody just made a mistake, he said.

With paperwork, that happens, he noted.

"I don't think anybody's trying to be slick and pull something. I'm just telling you that's the way it is," he said.

Lobbyist Bruce Hawkins of DBH Management Consultants said he doesn't know when the donation was made or why the party wants to return it but, he'd be willing to take it back.

"Sure I'll take the money," he said.

Sonja Yates Hubbard, the daughter of E-Z Mart Stores' founders, Jim and FaEllen Yates, said her family made annual donations of $10,000 to the party for several years.

The business wouldn't have given money to a federal account because federal law prohibited corporate donations, she added.

In a telephone interview Feb. 7, Gray said the party was already heavily in debt when he assumed leadership.

"We've never had less than about $150,000 in debt. We've certainly had more," he said.

Things are improving, he said.

"I'm telling you, in this month, I had less debt than we had the month before," he said. "Now what I will agree to is that [in 2019] we took on a lot of debt. Some of it was hangover from the campaign, invoices that came in after the [2018] campaign season. It is especially hard to raise money in an off-year in which everybody just lost a race."

The 2019 year-end FEC report showed higher debts and obligations ($147,039) than in previous years, however, at least in the federal account. Year-end debts and obligations had been $12,254 in 2015; $10,445 in 2016 and $52,305 in 2017.

The party even reported debts and obligations of minus $6,638 in 2018. The 2018 year-end figure isn't necessarily accurate, however.

In a Jan. 27 letter to party treasurer John Unger, FEC senior campaign-finance analyst Sean Krieger said a negative closing balance on a loan "suggests that you have either made a mathematical error or overpaid the loan."

The party has until March 2 to respond to the letter.

Paul S. Ryan, Common Cause's vice president of policy and litigation, said there are several "red flags" in the state Democrats' FEC filings, including unsecured loans.

"It's unusual," he said.

Missed loan payments and interest that doesn't appear to be accumulating also raise questions, he said.

Common Cause, a liberal-leaning watchdog group, has filed FEC complaints against President Donald Trump and, last month, against a nonprofit group founded by U.S. Sen. Bernie Sanders of Vermont, one of the leading contenders for the Democratic nomination for president.

FEC records indicate that the agency has repeatedly raised questions about the state party's campaign-finance reports.

In January, it sent five requests for additional information to the party, the FEC website shows. It sent two such requests in 2019, but 22 such requests in 2018.

Failure to fix problems that are identified in the requests can lead, potentially, to enforcement action, Ryan said.

But because of vacancies, the commission no longer has the quorum necessary to approve such measures, he said.

Political committees should, nonetheless, address any problems that are spotted, he said.

"The Democratic Party of Arkansas, you know, they're a major player in politics," Ryan said. "They need to do what it takes. They need to have a lawyer and other professionals help them comply with these laws."

SundayMonday on 02/16/2020

Print Headline: Records show loans a lifeline for Democrats

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