Wake DA Reopens Pay-to-Play Investigation of Video Sweepstakes Donors

"Some members of the five-member Board of Elections expressed frustrations that campaign finance laws were insufficient to cover what might be other criminal violations. They noted records showed millions of dollars moving through Burns’ personal and business accounts, and subsequent payments and political contributions in North Carolina." N&O, yesterday

Kim Strach, Executive Director at the NC State Board of Elections (SBOE), spent two years exonerating North Carolina politicians who took $274,000 from Chase Burns and his wife, the convicted owners of sweepstakes gambling operations. Much of that money went to Governor McCrory and other Republican leaders who could have theoretically helped out Burns by overturning NC's ban on sweepstakes gambling. (The SBOE looked at a total of some $700,000 in
questionable spending" by Burns in 2012.) The politicians took the money, but they didn't overturn the ban.

"Though the elections board did not refer the report for prosecution, members made it clear that the board’s scope and legal tools were limited and that there could be room for a deeper look."

The Wake District Attorney has decided to take that deeper look:

...Strach said her investigation was unable to determine if illegal money from Burns flowed into North Carolina. State investigators were not able to interview Burns, nor obtain his federal tax records.

Some members of the five-member Board of Elections expressed frustrations that campaign finance laws were insufficient to cover what might be other criminal violations. They noted records showed millions of dollars moving through Burns’ personal and business accounts, and subsequent payments and political contributions in North Carolina.

"Millions."

Kim Strach's investigation did collect one political pelt: SBOE member Paul Foley was forced to resign in disgrace after it was revealed that his Winston-Salem law firm also represented Chase Burns. So there's that.

How Much Does a Seat on the State Board of Elections Cost?

Foley

Paul Foley raised some substantial money for candidate Pat McCrory in 2012, hosting a fundraiser for the future governor and then pretty soon after that getting his appointment from McCrory to the state Board of Elections (SBOE).

McCrory has since been distancing himself from Foley, whom he forced to resign from the SBOE earlier this month, saying he didn't know Foley. Yet McCrory was present at the Foley fundraiser and posed for photographs with many of the donors in attendance. Foley presented the McCrory campaign with a bill for expenses and got reimbursed over $1,600 ($1,500 of that for the bar tab).

Under the circumstances, it would be so easy -- and so obviously human -- to forget your host and major benefactor.

This started out to be about the dirty gambling money sprayed around the North Carolina political world in 2012 by internet sweepstakes mogul Chase Burns. Now it's also about the cover-up.

N&O Editorial Calls for Paul Foley To Resign From SBOE

One curious omission from the News&Observer's editorial RE the conflict of interest problem for Paul Foley in the investigation of Chase Burns' political contributions....

The N&O editorial mentions that Foley recused himself from the investigation into Burns but fails to note that the "recusal" didn't last. According to the memorandum that SBOE Executive Director Kim Strach wrote on October 10, Foley continued to press SBOE staff for details about the investigation and demanded an advance copy of the findings.

Those "findings" are supposed to be released by Kim Strach tomorrow at a press conference in Raleigh. We're all ears.

Meanwhile, just for the "conflict-of-interest" file we're sure you're keeping on your laptop, Kim Strach's hubby, Phil Strach, in one of the attorneys defending voter suppression in that federal courtroom in Winston-Salem this week. Strach and Foley both served the NC Republican Party as general counsels.

Paul Foley, far left (partly obscured). Phil Strach, 4th from right on
the dais (seated)

Key Documents in the Paul Foley/Chase Burns Nexus

Here are the key documents in the unfolding story about whether State Board of Elections member Paul Foley was funneling details about the State Board of Elections investigation into campaign contributions made to dozens of NC politicians by internet gambling mogul Chase Burns:

1. June 23, 2015, report on the investigation of Mr. Foley's activities by Senior Deputy Attorney General Alexander McC. Peters

2. Oct. 8, 2014, memo "Pending Investigation and Potential Conflict of Interest," from Kim Strach (Exec. Dir., SBOE) to Josh Howard (Chair, SBOE)

3. April 19, 2013, original complaint filed by Democracy North Carolina, calling for an SBOE investigation into campaign contributions by Chase Burns and his wife

4. March 26, 2013, Democracy North Carolina press release, "McCrory Got $70,000 from Donors Tied to Sweepstakes Gambling, Including Another Operator Arrested in Florida Scandal"

5. March 18, 2013, Democracy North Carolina press release, "Sweepstakes Gambling Operator Is Top Donor to NC Legislators; Donations with Ties to McCrory's Law Firm Raise Questions"

6. September 29, 2014, memorandum from Paul Foley to Kim Strach, recusing himself from the Chase Burns investigation

7. September 29, 2014, "CONFIDENTIAL" memo from Kim Strach to Josh Howard, "Possible conflict involving an ongoing investigation into Chase Burns and International Internet Technologies, LLC"

8. October 10, 2014, memo from Kim Strach to Josh Howard, reporting that, despite his official "recusal" from the Chase Burns investigation, Paul Foley is continuing to ask questions and demand an advance copy of the investigative report before it is made public

What We Know So Far About State Board of Elections Member Paul Foley

Timeline below based on the investigative reporting of Michael Biesecker and Mitch Weiss for the Associated Press.

The principal actors in the timeline below:

Paul J. Foley

  

Kim Strach

Chase Burns

A Key Document in the Investigation

Memo from Kim Strach to Josh Howard in October 2014

State Board of Elections (SBOE) member Paul J. Foley was fishing for information about a confidential SBOE investigation of a man who had paid Foley's law firm at least $1.3 million. In an Oct. 10, 2014, memo to Josh Howard (Chair of the SBOE), Executive Director Kim Strach detailed inappropriate behavior by SBOE member Paul Foley regarding an on-going investigation into large campaign contributions given to Pat McCrory, Paul Tillis, Phil Berger, and other NC politicians in 2012 by Chase Burns, an Oklahoma Internet sweepstakes software magnate who was lobbying NC officials to make internet gambling legal in the state. SBOE Director Strach had learned belatedly that Foley's law firm represented Burns and that Foley's law firm had been paid a large sum by Burns. Foley never disclosed his conflict of interest to Strach or to anyone else at the SBOE. When Strach learned of the conflict, she insisted that Foley recuse himself from the SBOE investigation of Burns, but Foley continued to press for detailed information (particularly about which witnesses were being interviewed). “Mr. Foley stated that he wanted a copy of the findings report sent to him immediately,” Strach recounted in her Oct. 10 memo. Strach said she again advised Foley that would be improper, based on his recusal. “Mr. Foley was not satisfied with my answer …. I was alarmed by Mr. Foley’s behavior today, and I have again cautioned staff not to address any questions from Mr. Foley regarding this ongoing investigation.”

Timeline for Understanding What's Up With Paul Foley

2012 election cycle: Chase Burns, the internet sweepstakes magnate, gives at least $520,000 to dozens of NC politicians including Pat McCrory, who is running for governor. The money is disbursed to those politicians by lobbyists for the Charlotte law firm of Moore & Van Allen, which also happens to be Pat McCrory's former employer. Checks are written on an Oklahoma bank account which is subsequently seized for containing illegal sweepstakes money. The handwriting on the checks draws scrutiny: the politicians' names filled in as payees appear to be in a different handwriting from the amounts on the checks.

March 2013: Chase Burns is arrested in Florida on felony racketeering and conspiracy charges related to a fake veterans’ charity prosecutors say was used to launder $300 million from sweepstakes cafes there. Court filings from the Florida case show that Burns’ company made another $98 million from Internet cafes in North Carolina, though the games were illegal here.

April 19, 2013: Democracy North Carolina files a formal complaint about the Burns contributions with the SBOE, which at that time still has three Democrats and two Republicans sitting on the board. Democracy North Carolina wants to know if the contributions were made using corporate, rather than personal, funds, and was someone other than the contributor directing who received the money?

April 25, 2013: A majority on the SBOE agree that an investigation of Burns is warranted and is therefore set in motion.

April 26, 2013: Newly elected Gov. Pat McCrory replaces every board member on the SBOE to reflect the results of the 2012 elections: three new Republican members and two new Democratic members. Paul Foley is one of the Republicans appointed. The Burns investigation is already underway.

September 2014: SBOE staffers, looking through documents from the Florida investigation, discover that Burns has paid Foley’s law firm nearly $1.3 million between 2009 and March 2013, when Burns was arrested and his accounts frozen (including the account used to send the half-million to the North Carolina politicians).

September 29, 2014: Foley recuses himself from the Burns investigation (but not actually). He continues to press Strach and SBOE investigative staffers for details and updates.

October 10, 2014: Strach spills the beans about Foley's conflict of interest and his behavior to SBOE Chair Josh Howard. Howard quickly requests the Attorney General's office to investigate whether Foley’s conflict of interest tainted the Burns investigation.

June 23, 2015: Senior Deputy Attorney General Alexander Peters concludes in a letter to SBOE Chair Howard that it was proper for Foley to recuse himself from issues involving Burns but that Foley has not compromised the investigation (because SBOE investigators have mainly ignored his fishing). SBOE employees told the Attorney General's office that Foley’s behavior had been “unusual” and “unprecedented.” (SBOE officials hadn’t known about the connection between Foley’s firm and Burns.) The Attorney General's office did not investigate whether Foley had leaked information to lawyers in his firm who were actively representing Burns and said that the ethics commission or the Bar Association would be responsible for addressing whether Foley had acted ethically. Foley meanwhile chooses to interpret this opinion from the Attorney General's office as "exoneration."