More Videos:

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

How Super PACs Could Be Scamming You Out of Your Money

CORRECTION: In an earlier version of the article, we said that Dan Backer had "run" several super PACs. He provided legal and compliance services. This change is reflected in the 10th paragraph.

Donald Trump supporters should be cheered by the fact that Liberty Action Group has raised upwards of $750,000 in 2016. Its website says right at the top that contributions go "directly toward spreading the message through the media" to support the Republican nominee.

But, in fact, most of the organization's resources don't appear to be going towards that goal. The entity has made exactly zero dollars in actual independent expenditures this entire year, and its last quarterly FEC filing discloses spending consisting almost entirely of telemarketing and other fundraising-related expenses. There are a series of disbursements to one of the principal organizers and registered agents for the group -- Josiah "Joey" Cammer -- and the largest expenditure, more than $450,000, is to an unidentified "Media Consultant." Chances are, it's a scam.

Politico this week made waves with a report recounting the story of a 25-year-old hacker who has made $1 million with a similar scheme, dangling a a chance for dinner with the Republican presidential nominee in front of unsuspecting donors in return for contributions. Sounds extreme in its unscrupulous nature, but it's not uncommon.

Super PACS, officially known as independent-expenditure only committees, have multiplied since the 2010 Citizens United decision, and with their rise has come a proliferation of schemes aimed at raking in dollars without putting the funds towards much, if any, political activity.

How Scam PACs Work

"We're definitely seeing large numbers of PACs that appear to be spending a very small percentage of their money on actual campaigning," said Ann Ravel, a commissioner at the Federal Election Commission.

Most so-called "scam PACs" operate in a similar manner.

They raise large amounts of money through small-dollar donations online or via direct mail, often by utilizing misleading tactics and over-the-top rhetoric to convince potential donors to contribute. They will send an email asking for a petition signature, only to redirect to a link for a donation, or ask for funds to help "draft" a particular figure into a political race. They egg donors on by telling them the need is "urgent," that "this can't wait." They also tend to target older Americans.

When you look at their finances, you begin to notice that upwards of 70, 80, even 90 cents of every dollar is going towards overhead costs, consultant fees and list rentals instead of being spent on advertising and campaigning.

For example, an analysis of 10 conservative PACs registered to Washington, D.C. political consultant Scott Mackenzie revealed 92% of a combined $17.5 million raised went to operating expenses. Mackenzie did not return request for comment.

A separate analysis of committees Alexandria, Virg.-based attorney Dan Backer provided legal and compliance services for showed that they spent more than 87% of a combined $8 million raised on operating expenses in 2014, including $419,000 to Backer's own firm, DB Capitol Strategies. This election cycle, one of the groups, Stop Hillary PAC, has raised about $1.5 million but spent only about $2,000 on direct contributions to political committees. It has spent less than a third of its funds on independent expenditures, where you might find ad buys, but a significant percentage of that has gone to political vendors for list rental fees and other expenses designed to drive online fundraising and promote the PAC. 

"This is characteristic of the 'churn and burn' style of fundraising prevalent among scam PACs that largely serves to line the pockets of the consultants and vendors running the federal political committee but does little to actually support candidates or win elections," said Ryan Call, a Denver election lawyer and former chairman of the Colorado Republican Party.

Backer contends the criticism of his groups is unfair and that he and those like him are being targeted by those in the traditional campaign fundraising system who feel threatened. He noted that the Stop Hillary PAC was unable to list its expenses as independent expenditures until Clinton officially announced her presidential run.

"Grassroots costs more," he said. Consultants exist in lieu of staff, and renting lists, paying for advertising and spending on fundraising are necessary to get out the message.

"It's only natural that the B-side of any political communication is a solicitation for funds to those who like, agree, share your view to help you further that view by sending more messages to more people to engage them in the political movement you are building," he said. "Otherwise, you don't have money to rent lists and engage in political messaging to advance your movement, and it quickly stops."

Backer is the treasurer of Great America PAC, a group supporting Trump's candidacy. Thus far, the group has brought in about $5.4 million and spent around $6.6 million. It has employed some unique campaign tactics this election cycle, including running direct-response 1-800 ads to get donations and data.

Backer does not deny that there are some bad actors out there. He pointed to Liberty Action Group and another organization, American Priority PAC, both of which are registered under treasurer Henok Tedla, a Virginia-based accountant. American Priority's website claims to be a group of "young, business-minded millennials whose entire purpose is to empower you to vote Trump." The donate link on the page is broken, and it has not yet filed any contributions or expenditures with the FEC. Liberty Action, as previously mentioned, appears to have brought in $786,567 in donations and lists no committee contributions or independent expenditures. Neither group responded to request for comment.