It costs money to run an organization or business, particularly one that processes financial transactions. On top of the basic administrative overhead — like salary, benefits, rent and taxes — any organization that handles other people’s money must keep precise records and comply with the relevant laws; handling money involves significant legal, accounting, and compliance costs.
Political committees routinely handle money in the form of contributions and disbursements and must therefore incur virtually all of these costs. And unlike many businesses, political committees are required to publicly report their operating expenditures, including how much they’re paying, who’s getting the money and what goods or services are being purchased.
The public disclosure of that activity is essential to upholding transparency in our elections, which keeps voters informed and holds candidates and committees accountable. The public must be able to freely and openly observe how a committee is using its funds to determine whether a committee is acting as a responsible steward of the money it’s raising and spending.
But WinRed, one of the biggest players in elections today, isn’t reporting how it’s paying to run its operation — i.e., its operating expenditures. Instead, WinRed is withholding information about what goods and services it spends donors’ money to pay for, and who it pays to provide those goods and services.
This is not only a big problem for political transparency but also a blatant violation of federal law.
WinRed is a political committee that acts as a fundraising conduit for candidates and committees affiliated with the Republican Party.
If you visit the campaign website of a Republican candidate for federal office and click on the “Donate” button, chances are good that you’ll be directed to a donation page operated by WinRed on that candidate’s behalf. The funds you donate will go first to WinRed and then to the candidate’s campaign committee.
This is a widely used fundraising practice by both major political parties. ActBlue, a competing committee, provides a similar service for Democratic candidates and committees.
Here's how it works: if you gave $100 to a candidate using a WinRed-run donation page, WinRed would receive and process that as an earmarked contribution to the candidate. WinRed charges a fee for its services, currently 3.94%, and retains that portion of the money: WinRed would keep $3.94 of your $100 and transfer the remaining $96.06 to the candidate’s campaign.
Since it was organized in January 2019, WinRed has processed over $2.8 billion in earmarked contributions and over $212 million in contribution refunds. WinRed keeps its fee even if a contribution is later refunded.
Based on this tremendous volume of financial activity, WinRed has earned — by a conservative estimate — at least $114 million in fee-based revenue.
During the same period, however, WinRed has reported spending less than $2,700 on operating expenditures, along with just $243,000 in “debt” to its affiliate company, WinRed Technical Services (WTS), for unpaid legal, consulting and insurance fees; WinRed has never made a payment on its debt to WTS.
These paltry figures cannot possibly reflect the committee’s actual operating expenses.
This means WinRed is either blatantly failing to report its operating expenditures or is failing to report “in-kind” contributions in the form of free goods and services that it’s receiving from vendors.
When candidates or PACs receive free or discounted services, they have to report the value of the services (or the discount) as a contribution from — and an expenditure to — the service provider.
Either way, WinRed’s conduct violates federal campaign finance laws, and deprives its contributors, other committees, and voters of crucial disclosure information.
During the same three-and-a-half-year period, ActBlue has reported spending over $85 million in operating expenditures while processing over $5.5 billion dollars in earmarked contributions.
WinRed may have spent less than ActBlue’s $85 million to run its operation. But it cannot conceivably have spent as little as it has reported spending on its operation, which plainly indicates a glaring and ongoing reporting failure.
That’s why Campaign Legal Center (CLC) has filed a complaint with the Federal Election Commission (FEC) alleging that WinRed has violated federal campaign finance laws by not completely and accurately reporting its operating expenditures.
Voters have a right to know how WinRed is spending its money, and who it is paying, so they can make an informed choice as to whether to support candidates and committees that use its service.
Moreover, the contributors whose money provides the lifeblood of WinRed’s business have a right to know how WinRed is using their money, so they can make an informed decision about whether to continue giving through WinRed or find an alternative means of political fundraising.
Right now, we’re all in the dark about how WinRed is actually running its operation.
That presents a huge problem for political transparency and the rule of law. Transparency about how money is raised and spent on elections is essential to an open and inclusive democracy that serves voters’ interests.
The FEC should investigate WinRed and take the necessary actions to ensure that one of the largest financial operations in our election system is operating not in a black box of secrecy but out in the open.