A new kind of “political” entity that is leaving potential contributors skeptical and disappointed has recently emerged. A “Scam PAC” is a registered political action committee that often uses a name that mirrors a more-established organization but essentially defrauds its donors. These PACs typically collect small dollar amounts from many donors, but, rather than making contributions to support the cause or candidates as promised, Scam PACs spend most of their funds on administrative expenses. And the administrative expenses that eat up most PAC proceeds are payments to a consultant who is (you guessed it) the same individual who established the PAC.
Contributions and expenditures by these PACs are fully disclosed to the Federal Elections Commission or similar state level entity. With some time and effort, the operations of a Scam PAC can be uncovered. But there are currently few enforcement mechanisms to available to regulators and no requirement that a certain percentage of contributions to a PAC actually be used to support candidates or parties.
The Federal Elections Commission recently proposed legislation to regulate Scam PACs, but it is unclear if those proposed laws will ever be enacted. Meanwhile, donors should be careful and do their research before contributing to any PAC or other political organization.
This article was reprinted from the Winter 2017 Compliance Connections newsletter. Download the complete issue here.Download PDF