Congressman Michael Grimm Involved In Controversial “Donor Swapping” To Skirt Fundraising Limits?

Congressman Michael Grimm may have engaged in a controversial and ethically questionable practice of “donor swapping” in order to skirt the legal limits on campaign contributions in his 2010 campaign, reports the Daily News.

The paper concluded a review of the Republican congressman’s financial records, finding as many as 20 transactions totaling more than $75,000 that appear to be intended to hide contributions that exceed the limits.

The paper describes the process:

The swapping works like this: A donor who gives the maximum to Candidate A then donates to Candidate B. In return, a donor or friend of Candidate B gives an identical amount to Candidate A.

A Daily News review of 2010 fundraising records found more than 20 transactions suggesting supporters of Grimm and candidates in California, South Dakota, Illinois and Virginia swapped donations totaling more than $75,000.

One set of transactions involved Grimm himself:

On March 31, 2010, Grimm and Durand each gave $2,400 to Michael Curb, a Republican making a longshot bid for Congress in South Dakota. On the same day, Allison Bolger, an accountant in a Sioux Falls, S.D., firm headed by Curb, donated $4,800 to Grimm.

“Why would someone in South Dakota be interested in Grimm?” said Melanie Sloan, who heads Citizens for Responsibility and Ethics and examined the transactions at the request of The News. “They certainly are suspicious.”

To describe the scheme another way, if a donor wants to give $9,600 to a candidate, he gives one half of that directly to the candidate, and another check to another candidate the donor may not have a significant interest in. That second candidate then sends the money over to the first candidate, hiding the original source of the money – in a sense, laundering it.

Campaign contribution limits are in place to limit the influence of money in politics, particularly to prevent legislators from being pressured by big donors to support legislation that might benefit the donors. The reporting process, which requires the names of donors to be made public, is intended to add transparency to the process so that such lines of influence can be made clear to constituents.

Candidates who engage in donor swapping undermine that transparency and that limitation on influence from special interests. It’s a violation of the spirit of the law, if not the law itself.

According to the Daily News, Grimm has denied wrongdoing, but declined to comment on the apparent swaps that the records reveal.

Swapping as a crime can be hard to prove, as investigators must show that the candidates or their staffs conspired to hide the source of the funds.

The report comes on the heels of the arrest of Diana Durand, a friend of Grimm’s who was busted earlier this month for violating federal campaign laws to steer money to the congressman. She was charged with election fraud, and the allegations against her bare a striking resemblance to donor swapping: she allegedly used straw donors to conceal contributions that exceeded the maximum amount.

Durand, as noted in the Daily News article, was also a figure in the apparent donor swapping scheme.

Grimm is also the subject of an the ongoing FBI probe into his 2010 campaign fundraising, in which another Grimm associate is believed to have helped raise as much as $300,000 from a Jewish congregation in Manhattan, and then illegally funneled the money to Grimm’s campaign. That fundraiser, Ofer Biton, pleaded guilty to visa fraud last year as a result of the probe.

That investigation, as reported last week by the Daily News, has been impeded by a bribery investigation by Israeli authorities into the rabbi.

It has not been revealed whether investigators are also looking into the donor swapping allegations.