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Wednesday, October 28, 2020

The mystery of a GOP congressman's seemingly rent-free campaign office

For at least seven years, GOP Rep. Jim Hagedorn appears to have enjoyed rent-free use of a campaign office supplied by a political donor — which would be a clear violation of federal election law that comes amid mounting scrutiny of his finances.

In dozens of filings with the Federal Election Commission, as early as October 2013 and as recently as last month, Hagedorn has listed a basement suite in a downtown Mankato, Minn., building as his campaign’s headquarters: Suite 7 of the Brett’s Building at 11 Civic Center Plaza. But election spending records show Hagedorn has reported no payments for the use of that space over the course of the past four elections he’s run to represent Minnesota’s 1st Congressional District, including his current race.

Hagedorn’s campaign and the former owner of the building struggled to explain the situation. In recent interviews, they insisted there had been no impropriety but gave conflicting accounts of why no payments have been disclosed. It all adds up to a portrait of, at best, highly irregular or sloppy spending practices; at worst, it’s a breach of campaign finance law. Nonpartisan ethics experts, meanwhile, expressed deep skepticism with Hagedorn’s actions.

“It sounds like something that could potentially be a fairly serious violation of campaign finance law and the ethics rules,” said Bryson Morgan, a former investigative counsel at the Office of Congressional Ethics, who now practices political law at Caplin & Drysdale. “They need to pay fair-market value for any space that the campaign uses.”

The news follows other recent revelations from the news website Minnesota Reformer that portray a congressman frequently skirting the line on congressional ethics. Hagedorn is facing scrutiny for having paid more than $100,000 in taxpayer money to a printing company owned by a staff member; a different company, owned by the brother of his former chief of staff, took in roughly $340,000 in public funds. Hagedorn also drew criticism for appearing on a local radio show hosted by a campaign vendor without disclosing their financial ties.

The allegations of unethical behavior could cost Hagedorn in November. His opponent, Democratic-Farmer-Labor candidate Dan Feehan, has made Hagedorn’s “personal corruption” a central theme in his campaign, and polls show a tight race. Feehan lost to Hagedorn by less than half of a percentage point in 2018, even as President Donald Trump carried the district by almost 15 points in 2016. The Democratic Congressional Campaign Committee is now spending heavily on the airwaves to snatch the seat.

And if he does win reelection, Hagedorn may be looking at multiple ethics investigations: A Minneapolis lawyer has filed a complaint with the Office of Congressional Ethics over Hagedorn’s congressional office spending, while Hagedorn himself financed an internal review of the spending, fired his former chief of staff and self-reported it to the House Ethics Committee. Neither entity comments on whether probes are ongoing.

A headquarters with no paper trail

The historic Brett’s Building is among downtown Mankato’s premier office spaces — forming with the adjacent Mankato Place mall a sprawling industrial-chic maze of government facilities, restaurants, event halls and a movie theater, with an attached Hilton Garden Inn hugging a bend in the Minnesota River.

It’s also where Hagedorn set up shop for his regional congressional office, distinct from the campaign office, that has cost $2,200 of taxpayer money per month since the beginning of 2019, according to congressional spending records.

The money Hagedorn’s congressional office uses to pay for space on the third floor of the Brett’s Building comes from his taxpayer-funded budget, which he can use only for official expenses. Any use of that district office for campaign purposes or paying for a campaign office with taxpayer money would be illegal. Campaign finance regulations require a strict separation between such funds, so as not to give incumbents an unfair advantage.

“If he gets that basement space as part of the rent he’s paying for his congressional office, then that is arguably illegally using congressional funds to pay for the campaign office,” said Larry Noble, a former top FEC lawyer who now teaches at American University in Washington, D.C.

But even if Hagedorn were currently paying for his campaign office using taxpayer funds, that wouldn’t explain the absence of payments that began before he was elected to Congress in 2018. He first reported using the space in 2013 for a failed congressional run against now-Gov. Tim Walz.

Campaign finance laws state a candidate must pay fair-market rate for all facilities. The office space could also be donated, but then the campaign would have had to disclose to the FEC that the owner of the building gave an “in-kind contribution,” a designation for a donation of goods, services, time or other noncash items. And like normal cash donations, in-kind donations must be limited to $5,600 per election cycle, with half of that designated for a primary and the other half for a general election.

Hagedorn’s campaign has reported no in-kind contributions or payments for office space in any year since his campaign committee formed in 2013.

The one exception to these rules is that any contribution worth less than $200 does not have to be reported. When reached by phone, Thomas Datwyler, who handles finances for Hagedorn’s campaign, said he believes that may have been what happened.

“We were in-kinded, but I think it was under $200. I want to say, it was like a $200 in-kind. So that’s probably why it didn’t show up,” he said. “They basically just took a percentage of the actual space itself, which was very minuscule, and that’s how they calculated it out. And that’s why they got to be like 200 bucks for the entire year. Honestly, I’m pretty positive.”

Datwyler said he would clarify the issue and respond with more information, but he did not do so and did not return subsequent calls and messages about the issue.

The explanation also would suggest Hagedorn’s campaign is paying well below market rate. The average tenant in the building pays rent of $8 to $27 per month per square foot, according to a floor plan and pitch by the building’s manager obtained by POLITICO. By those costs, Hagedorn’s campaign office would have had to be no larger than a few square feet to be worth only $200 over the course of two years. The floor plan shows Suite 7 is significantly larger than that, with an entry room opening into two back rooms.

The claim is further undercut by the fact that the campaign has previously reported in-kind donations as small as $114.75.

Finally, failing to disclose this specific in-kind donation would probably be a violation of campaign finance law because the person who owned the building, Gordon Awsumb, has already been a big donor to Hagedorn. If all he gave was a small in-kind donation, it wouldn’t have to be reported, but since he’s donated more than $200 in cash during the past several elections, the FEC would require the campaign to disclose in-kind contributions of any value whatsoever from him.

A key donor, with shifting explanations

For most of the years Hagedorn listed that address as his campaign headquarters, the Brett’s Building was owned by Awsumb, a local developer who rehabbed the structure after Brett’s Department Store, there since 1868, shuttered in 1991.

Awsumb has given more than $8,500 to Hagedorn’s campaign since 2015, including $4,300 this election cycle — all listed as cash donations, not in-kind contributions. That opens up the possibility of yet another violation: In-kind donations reflecting the true value of the office space could put Awsumb over the legal contribution limit, meaning the campaign would have to return some money to him.

When initially reached by phone, Awsumb said he has moved to Texas and doesn’t know much about the Hagedorn campaign office, even though he is still listed as the management contact for the building.

When asked whether the campaign uses a space in the basement, he replied, “Not any longer, I don’t think. Basically, he stored signs there.”

When asked why there have been no rent payments, he replied: “I don’t know what you’re talking about.”

But in follow-up emails, Awsumb had a different story to tell. He said the campaign actually never had an office in the building and that a Suite 7 never existed.

“The Hagedorn Campaign does not now and has never in the past leased office space in the Mankato Place Complex/Brett’s building,” Awsumb said via email. “No rent-free office space has been provided to the Hagedorn Campaign. In fact, Suite 7 does not exist as a physical office location within the building.”

However, a July 2018 GOP invite instructed volunteers to arrive at the “Hagedorn Campaign Office; 11 Civic Center Drive; Suite 007; Mankato.” And over the course of several months that year, from at least July to September, a number of photos posted on various social media accounts and news outlets show Hagedorn in an office outfitted with cubicle dividers and a couch, its bare stone walls lined with Hagedorn campaign signs and a cardboard standee of the late President Ronald Reagan. According to Roll Call, his campaign office included a framed portrait of Trump. Hagedorn’s own Twitter account identified the place as “Hagedorn Headquarters in Makato.”

When presented by email with that information, Awsumb said the room is an “unfinished storage room and was never leased as an office suite to any tenant.” He said the Hagedorn campaign did use a conference room that is available to tenants and community groups.

“This is provided as part of the lease for the tenants and typically for no fee for community groups,” he said. “The Hagedorn Campaign did make use of that space in 2018. Our records show that the Hagedorn Campaign did pay a fee for the use of that community conference space.”

However, FEC files do not show any fee paid by the Hagedorn campaign for use of that space in 2018 or any other year.

Finally, Awsumb said Hagedorn merely used Suite 7 as a mailing address and was given permission to do so by a local GOP organization, the Blue Earth County Republicans. Minnesota state spending records do show the GOP group pays $100 per month for space in that building, but the ex-officio chairwoman of the group said she never agreed to allow Hagedorn to use any space.

“The [Hagedorn] campaign office was down in the basement, I believe, the lower level of the Brett’s building,” said Willa Dailey. “In fact, our treasurer is such a stickler that we did not even allow use of our space for anything campaign-related. You can’t mix federal with state.”

Another former chairman of the county Republicans, Minnesota state Rep. Jeremy Munson, said Hagedorn’s campaign has never had an office in the building, but has made use of a community conference room and a P.O. box.

“I know that they have a P.O. box there,” Munson said. “A lot of people have P.O. boxes there, and I don’t think Gordon charges people to have a P.O. box to get their mail delivered there.”

Hagedorn’s campaign would have to pay fair market rate for a P.O. box and even for the temporary use of space to hold campaign events, according to campaign finance laws. And that would almost certainly be more than $200 over the course of an election campaign. The UPS Store in Mankato, for instance, charges a minimum of $25 per month for their P.O. boxes.

House spending records show rent payments for Hagedorn’s congressional district office were made in 2019 to Awsumb’s company, Minnesota Office Investments Inc., and in 2020 to Mankato Place 1 LLC, a company that bought the building for $12 million from Awsumb last year.

Mankato Place 1 LLC is registered in Delaware and doesn’t disclose its ownership. Awsumb declined to say who owns the company.

A contact number listed for Mankato Place 1 LLC, however, reached Mike Kahler, another regional businessman who is a partner with Awsumb in the planned construction of a Marriott Spring Hill Resort in Mankato, according to the Mankato Free Press.

“Everyone in our building pays rent as far as I know,” Kahler said. “I’ll have to dig into it and get back to you.”

Kahler did not circle back, nor did he respond to subsequent phone calls. But Ronald Groth, a Minneapolis-based lawyer who was listed as Mankato Place 1 LLC’s counsel when it bought the Brett’s Building, said in a statement that Hagedorn does not have a campaign office there.

“Although Jim Hagedorn has his congressional office in the premises owned by Mankato Place 1, LLC, Congressman Hagedorn has never had a campaign office in the premises during the time that Mankato Place 1, LLC has owned the property,” he said.

Neither Mankato Place 1 LLC, Minnesota Office Investments Inc., Awsumb, Kahler — nor anyone else for that matter — have been recipients of rent payments from Hagedorn’s campaign, according to FEC records, and the campaign has not disclosed any in-kind contributions from those people or their companies, or any other in-kind contributions for office rent.

The campaign has paid periodic “campaign event fees” from 2017 to 2020 to the Minnesota Republican Party, which is chaired by Hagedorn’s wife, Jennifer Carnahan. Could an explanation be that Hagedorn paid the state party, which then paid for the office? Not according to FEC records, which show the state GOP has not paid any fees to any companies associated with the building.

Carnahan has been weathering some scandals of her own lately, as the party’s executive director resigned with no explanation and records revealed Carnahan had asked for private guided tours from the National Park Service as a congressman’s wife.

Empty offices and lingering questions

Members of Congress who get free or cheap rent is one of those campaign finance violations that pop up from time to time. But the mystery of Hagedorn’s campaign office is deepened by the fact that Hagedorn’s office doesn’t seem to actually be at the address listed on official FEC files — at least, not anymore.

An FEC filing as recent as September lists 11 Civic Center Plaza, Suite 7 as Hagedorn’s campaign office, and his campaign spokeswoman Rachael Grooms confirmed this month it is the campaign’s office. She did not respond to subsequent emails asking about any payments made for using Suite 7. Hagedorn’s campaign manager, Lon Firchau, also did not return a voicemail left on his cellphone.

Yet a visit to the Brett’s Building revealed that, much like the fading department store sign on the three-story building, Hagedorn’s campaign office is a ghost.

The basement now has a Suite 8 and a Suite 6, but no Suite 7. A janitorial worker, who did not want to be quoted by name, said Hagedorn used to have a campaign office in the basement, but it has now been absorbed into Suite 11, which is home to Options for Women, a counseling service that exists to dissuade women from having abortions.

The worker said a postal delivery person also recently came looking for Suite 7, but with no luck. The worker said she thinks Hagedorn moved into a Blue Earth County Republican Party office in the adjacent Mankato Place mall.

A worker in Hagedorn’s district office on the third floor directed a reporter to an office in a neighboring building that is occupied by Trump Victory, a joint fundraising committee of Trump’s campaign and the Republican National Committee.

Both the county GOP and Trump Victory offices were empty and messages left on listed phone numbers were not returned.

A call made to a number listed on the Hagedorn campaign’s Facebook page was returned by a Virginia man who identified himself as Charles Harvey, whose name and phone number are linked to a foundation that exists to help noncitizen U.S. military veterans apply for citizenship.

He said he’s just a longtime friend of Hagedorn’s who uses a Google Voice number to take messages and forward them to the campaign. He said he doesn’t know where the office is and doesn’t live in Minnesota.

Morgan, the congressional ethics expert, said all this makes for an incredibly confusing situation, as well as another potential FEC violation; providing a false address to the agency would also be illegal.

“The question of where a member of Congress’ campaign office is located and what they are paying for that office should not be a mystery that takes weeks of investigative reporting to track down with conflicting, and sort of confusing, answers,” Morgan said. “It’s odd that there is not a straightforward answer to what is a very simple question.”

Deena Winter contributed to this report.

This post courtesy of politico

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