December 17, 2004

Anti-Issue 1 group reports money problems to state

by Eric Resnick

Columbus--The group working to defeat an Ohio anti-marriage amendment last fall fired its political director shortly before the election, and now has reported financial irregularities to the state stemming from the man�s handling of a credit card account.

The matter involves $78,920 in credit card contributions to the Ohioans Protecting the Constitution web site which may have been managed in a way that violated Ohio election law.

No money is missing, and all of it has been accounted for. The problem lies only in how the funds were handled.

The Ohio Elections Commission will hear a matter brought by OPC against itself over the account management problems.

The case, which was set to be heard December 16, was filed December 10 with the political action committee�s financial report to the secretary of state. The procedure is known as a self-referral.

Ohioans Protecting the Constitution was the unsuccessful campaign to defeat Issue 1, the amendment to Ohio�s constitution against same-sex marriages, civil unions, and recognition of other non-marital relationships.

OPC was set up by the state GLBT political organization Ohioans for Growth and Equality, which hired Alan Melamed and Ian James of the Strategy Network to run the campaign, and appointed an executive committee to advise and supervise them.

Chad Foust of Columbus heads both the executive committee and OGE.

An affidavit filed by campaign treasurer Lynn Greer of Columbus says OPC �never had control of the merchant account� that allowed the campaign to receive contributions by credit card.

Greer says that the �procedure for the periodic transfer of the credit card contributions by Mr. James or other personnel at TSN [the Strategy Network] from the merchant account to the OPC account� at another bank was violated, and rules for the campaign�s payments to the Strategy Network were not followed.

�As a result,� the affidavit continues, �campaign-related expenses were paid directly out of the merchant account, oftentimes without the approval of the treasurer, and campaign contributions were used to pay for certain personal and/or business expenses of Mr. James and TSN.�

James was terminated by Melamed and the committee on October 28 as a result.

James and Melamed have also severed their other business ties. The two have, according to Melamed, �collaborated� on past campaign ventures under the Strategy Network, which is James� company.

The company�s web site lists James as president and Melamed as the senior vice president for public affairs and governmental relations.

The two submitted their proposal for running the campaign to OGE as the Strategy Network in May after having worked informally since April. Several other candidates were still being considered after the two had already started their informal work.

The pair also advised OGE on the attempt to defeat an earlier �defense of marriage act� passed by the Ohio legislature and signed by the governor in February.

The condition of hire, however, was an arrangement that made Melamed the campaign�s manager, supervising James as political director.

The contract was signed by then-treasurer Mary Jo Hudson, who resigned to accept an appointment to the Columbus City Council, and Melamed.

At the time, Mari Engelhardt, who ran the GLBT outreach and field operation for the Kucinich presidential campaign, was hired as the field director. Engelhardt was terminated in August, leaving that position unfilled for the rest of the campaign.

All campaign employees, which also included Ariana Adams, Amy Culbertson, and Erin White, were considered employees of the Strategy Network, paid by fund transfers between the campaign and the company until James� departure, when the three and Melamed became employees of the campaign.

Some vendors were also to be paid by the Strategy Network, with funds from the campaign.

According to Foust, all campaign staff reported to Melamed and James, and Melamed reported to the committee. Neither the committee nor OGE was involved in the day-to-day operation of the campaign.

Foust declined to comment on the matter before the elections commission, deferring to Melamed.

Greer said she started to suspect problems with the merchant account �about three weeks� after becoming treasurer in September.

�It was supposed to be like a direct deposit,� said Greer, �but the money was not being transmitted daily.�

Greer said people were telling her they contributed through the web page, but she knew nothing about it.

Greer, James, and Melamed all said that the merchant account was held by the Strategy Network because the campaign was unable to get a merchant account on its own.

OPC attorney Rick Brunner of Columbus said that had the account automatically transmitted its funds and reports to the treasurer daily, that arrangement would have been acceptable.

Greer and Melamed said they discovered that wasn�t happening.

According to the affidavit, bank records show $78,920 contributed by credit card, but that only $6,775 �actually transferred to the OPC account from the merchant account.�

Greer noted that the bank records allowed the campaign to find all the contributors and balance the books �to the penny,� and allowed the previous campaign finance report filed October 21 to be corrected.

James said, �The committee had full knowledge of what was happening� with the merchant account, adding that he kept detailed records, and the transactions were acceptable under the terms of the contract.

�This is simply a clerical issue,� said James.

James said the money went to pay campaign bills his company was responsible for paying, including employee benefits and withholding.

A December 8 internal e-mail obtained by the Gay People�s Chronicle indicates James had receipts for $8,145 covering staff salaries and benefits between August 10 and October 15.

The message also indicates that $64,000 was paid to the Kitchens Group, a polling firm. An additional $64,000 payment to Kitchens was made from the campaign account on October 22, according to the finance report.

�Between the [$8,145] total above, the $64,000 to Kitchens and the $6,775 previously delivered to the campaign, this accounts for the entire $78,920,� according to the e- mail.

James says he is still owed money by the campaign, and is considering ways to collect it.

Brunner, whose office generated the December 8 e-mail, said James accounted for the money by way of invoices and receipts after the fact, and that campaign law requires expenditures to go through the campaign account under the supervision of the treasurer.

�The technical defect is that it is not supposed to happen that way,� said Brunner, �He should have submitted invoices and been paid by check from the campaign.�

Brunner said the accounts balance because OPC did not pay James any more money.

Melamed said further problems were prevented with the account because action was taken.

OPC is asking the elections commission to find that action was taken, and that the campaign �and its other agents have undertaken their best efforts to comply with both the letter and the spirit of Ohio�s campaign finance reporting laws and regulations� and find no probable cause for further investigation.

Brunner said the campaign did the self-referral and brought the problems to the attention of the commission before Secretary of State Ken Blackwell could question them.

Brunner is representing the campaign before the commission.

In separate but related matters, Engelhardt has retained an attorney to collect pay she claims she is owed by the campaign, the Strategy Network, or both.

Engelhardt�s contract called for her to be paid one month�s salary as severance, which amounts to either $6,000 or $7,000, plus another $964 in expense reimbursements.

Melamed acknowledged that Engelhardt is owed some money, and that he thought James had made the payments. He added that because she was not dismissed for cause, she should have gotten the severance pay.

Melamed said that James, however, was �fired for cause� and is not getting the $12,500 salary for November he claims he is owed.

James also says he is owed the commission from the campaign�s purchase of TV advertising, which was supposed to be split between him and Melamed as part of their contract.

The commission is estimated to be about ten percent of the buy, though neither Melamed nor James would disclose the figure. The campaign spent $500,443 on commissioned media.

Melamed acknowledged receiving his share of the commission.

Melamed expects the campaign to end with $20,000 to $25,000 left over after all expenses are paid.

The campaign files a year-end report with the Secretary of State on January 31.