Group says Ducey re-election campaign received illegal $500,000 donation

PHOENIX — A self-described watchdog group is alleging Gov. Doug Ducey’s re-election campaign got an illegal $500,000 donation.

The complaint filed Tuesday by the Campaign Legal Center with the Secretary of State’s Office charges that a donation listed as coming from a Delaware corporation known as Blue Magnolia Investments LLC really is little more than disguised funds from Larry Van Tuyl. Brendan Fischer, director of the center’s federal reform program, said that violates Arizona laws prohibiting “straw” donations where the true identity of the donor is hidden from the public by running the money through a third party.

This is also the same organization that gave $100,000 to DefendArizona, a political action committee set up solely to help Martha McSally with what ultimately proved her unsuccessful bid for the U.S. Senate.

There is no listing or website for Blue Magnolia, which the center alleges is little more than a shell company set up solely to funnel campaign donations. Van Tuyl, chairman of the automotive group of Berkshire Hathaway, did not immediately return a call to his Texas office.

There is no allegation the Ducey Victory Fund was aware of what the center contends is the true source of the money.

But there also is no indication that anyone from the campaign checked out who was really behind what what appears to be the largest donation to the governor’s re-election effort. Fischer said that raises questions.

“I don’t know under Arizona law what the obligation would be,” he said. “I think it’s fair to say that it would be prudent to inquire further about the source of a contribution from a mysterious LLC with no public footprint.”

J.P. Twist, who managed Ducey’s campaign, would not respond to any questions about the complaint — or anything about the $500,000 donation and whether anyone from the campaign checked into the source of the dollars.

At the heart of the complaint is a state law that makes it a crime to make a contribution in the name of another person or to knowingly accept a contribution made by someone in the name of another person. Violations are a Class 6 felony that carry a one-year prison term and a $150,000 fine.

Any investigation by the secretary of state is going to provide a deeper look into the unusual way the governor and his supporters raised money for the re-election campaign.

Ducey had his own, separate, campaign committee. But under Arizona law it could not accept money from corporations. And individual donations were limited to $5,100.

The separate Ducey Victory Fund, however, had no such constraints.

Daniel Scarpinato, who handled press for the governor and is now in line to be Ducey’s chief of staff, acknowledged during the campaign that the Victory Fund was set up to provide a venue for people who wanted to give more than that $5,100 as well as to accept corporate dollars.

Anything below the $5,100 limit and noncorporate funds were transferred to the governor’s own campaign. The most recent reports put that figure at $3 million, boosting the total in Ducey’s own fund to $5.6 million.

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The more than $4 million balance, including corporate dollars like those from Blue Magnolia, were then given to the Arizona Republican Party, which has no similar legal constraints under state law on where it can collect dollars.

And the party, in turn, then was free to spend money on Ducey’s behalf.

Scarpinato defended the practice.

He said it was not done to hide the names of donors, pointing out each was listed on the campaign finance reports filed by the Victory Fund. That included the Blue Magnolia donation.

But Fischer said none of that permits contributions to Arizona candidates — or even separate campaign committees they set up — from shell corporations.

In the complaint, Fischer said Blue Magnolia was incorporated April 24. He said there is no apparent website and no public records on the entity other than the Delaware incorporation records.

Just two weeks later, on May 11, Blue Magnolia made the $500,000 donation to the Ducey Victory Fund from its Delaware address.

But that wasn’t what got the attention of the center to Blue Magnolia. Instead it was a May 30 donation of $100,000 by the company to Defend Arizona, a donation that triggered a still-pending complaint it filed with the Federal Election Commission.

In fact, Fischer said, it was not until the center saw a Capitol Media Services story about the donation to the Ducey Victory Fund that it became aware of the company’s activities on the state level.

Both donations, Fischer said, are legally questionable.

“The available facts suggest that Blue Magnolia did not have sufficient income from assets, investment earnings, business revenues, or bona fide capital investment to make a $500,000 contribution to the Ducey Victory Fund committee and a $100,000 contribution to DefendArizona, absent an infusion of funds provided to it for such purpose,” he wrote in his complaint to the Secretary of State’s Office.

And Fischer said the timing of the donation — just weeks after Blue Magnolia was incorporated — “strongly suggests” someone set up the company and gave it the money for the specific purpose of making the donations.

There’s something else.

About a month after the center filed its complaint about the $100,000 donation to DefendArizona, that organization filed an amended campaign finance report saying the money had come from Van Tuyl. All that, said Fischer, provides evidence that Van Tuyl and Blue Magnolia did the same thing in the case of the donation to the Ducey Victory Fund.