CBC Corporate Whore David Scott under investigation

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HAT TIP: BLACK ELECTORATE/POLITICO.COM

HAT TIP By: Kenneth P. Vogel
May 23, 2007 05:36 PM EST

David Scott’s life appears in perfect order: A self-made businessman who married into an iconic Atlanta family, he rose through the ranks of Georgia state politics before winning a congressional seat in 2002 that he’s handily defended since.

A close look at his personal, campaign and business finances, however, reveals a tangled web of loans, debt, more than $182,000 in unpaid taxes and an intermingling of his political and private funds — including more than $643,000 in campaign payments to his family, their company and its employees. All of that has campaign finance experts puzzled and Scott’s team sifting through old records to reconstruct transactions it could not immediately explain to The Politico.

Scott, a moderate, pro-business Democrat, has declined interview requests. And without a detailed explanation from Scott, the story behind his finances remains unclear.

The campaign hired a Georgia attorney, Mike Williams, to help review the campaign’s finances and answer The Politico’s questions.

He said neither Scott and his family nor their advertising company, Dayn-Mark Advertising, have profited from donations to Scott’s campaign. “David Scott’s campaign has done everything within federal requirements, and we believe the record will bear that out,” Williams said.

Williams said Scott and his family’s company are working with the local, state and federal governments to resolve the tax issues. And Scott is compiling information for a detailed response to questions from The Politico about his personal, campaign and business finances, said Williams, who accused The Politico of pursuing a “politically motivated” story.

Here are the facts — drawn from Scott’s tax and property records, campaign and personal finance reports and other public information — that raise questions about the connections between his campaign, business and family finances.

Since his first congressional bid in 2002, Scott’s campaign has cut checks totaling more than $643,000 to his family, its company and the company’s employees, according to Federal Election Commission data.

Though Scott hasn’t faced a serious challenge since 2002, those payments became larger and more frequent the following year — around the time Scott, his wife and their company began slipping behind on their taxes. Combined, they owe more than $182,000 in local, state and federal taxes, according to documents on file in Atlanta’s Fulton County Courthouse.

Even though the offices for Scott’s advertising company are located outside his congressional district, Scott’s campaign over the years has paid the company more than $54,500 in rent, which FEC rules allow. David Scott for Congress also pays Dayn-Mark for staff time, telephone bills and overhead. Plus, all six officials and employees listed on Dayn-Mark’s website — including Scott’s wife and two daughters — have received disbursements from the campaign, as has his son-in-law, who isn’t employed by the company.

In the 1970s, Scott and his wife, Alfredia, sister of Atlanta Braves legend Hank Aaron, started Dayn-Mark Advertising, which is named for their two daughters, Dayna and Marcye. As Scott rose in the Georgia state legislature, the company blossomed as a developer of minority-targeted advertising campaigns, eventually representing a handful of big businesses, many with ties to Atlanta, some with ties to Aaron.

In 2003, Dayn-Mark missed the first of a series of federal income tax payments that tallied nearly $154,000, according to an Internal Revenue Service lien filed against the company late last year. Dayn-Mark also has racked up more than $4,600 in unpaid local and state taxes since 1998, according to liens on file at the courthouse.

Williams said Dayn-Mark is working with the IRS to resolve the lien.

Other liens show that since 2003, David and Alfredia Scott have failed to pay $23,200 in taxes on their home, a 5,000-square-foot stone house in the historic Inman Park neighborhood — which is also outside his congressional district.

Williams said before The Politico’s inquiries, the Scotts were unaware of the liens on their home, which Williams asserted may reflect an error by their mortgage company.

Even as the Scotts and their business were falling behind on taxes, they increased their stock holdings from about $500 to about $67,000, according to Scott’s personal financial disclosure statements for 2003 on file with the House. In 2003, they paid $702,000 for a three-bedroom Washington row house near the Capitol.

At the same time, Scott’s congressional campaign, for which Hank Aaron is listed as treasurer, stepped up payments to Dayn-Mark and its employees.

David Scott for Congress recorded payments to Dayn-Mark and its employees for a wide array of purposes, from canvassing to billboards to office supplies. Many of the payments appear to be reimbursements. Nearly $242,000 in disbursements were listed twice — once to Dayn-Mark or an employee or family member and again to an outside vendor such as a billboard company or office supply store. But only one payment was counted against his total cash on hand — a permitted, but unusual, reporting technique.

Scott has also loaned his campaign $527,000, almost all of which has been repaid, according to FEC records.

Williams said such loans are not unusual for candidates making their first few runs for Congress. And he said “most of the money that was disbursed to Dayn-Mark was reimbursement for expenditures made on behalf of the campaign.”

Larry Norton, an election lawyer at Womble Carlyle Sandridge & Rice who was FEC general counsel until this year, said he’s never seen a campaign report expenses like Scott’s. Brett Kappel, a Democratic lawyer specializing in election and ethics for Vorys, Sater, Seymour and Pease, called the arrangement between Scott’s campaign and his company “unnecessarily confusing.”

Williams responded that “not all campaigns look alike” and “everything they have done is in compliance.”

If a company is merely acting as an intermediary between a campaign and its vendors, federal election laws require such services be offered in the normal course of business. That means the campaign pays fair market value for the service and that the company offers the service to other clients.

Atlanta lawyer Kevin Ross, who managed Scott’s 2002 campaign and has overseen those of many prominent Atlanta Democrats, said he was not aware of Dayn-Mark doing any political advertising.

The campaign from 2002 to 2004 paid $18,000 to an FEC compliance consultant, Whitney Burns of Springfield, Va. Though Ross said he wasn’t regularly involved in the reporting, he recalled early in the campaign that aides had “discussions regarding how you needed to make sure that the corporate was kept distinct … (and) about the need to work within the rules.”

Burns did not return telephone calls seeking comment.

Federal law prohibits candidates from spending campaign contributions for personal uses, defined as expenses “that would exist irrespective of the candidate’s campaign or duties as a federal officeholder.” Campaigns are allowed to pay rent and other fees to the candidate or the candidate’s business as long as the goods or services provided in return are at fair market value. Campaigns are also allowed to pay salaries to the candidate’s family “if a family member is providing bona fide services to the campaign.”

Donors and voters “would be shocked and appalled” if they knew how Scott was using his campaign account, said Donzella James, a former Georgia state senator who ran against Scott in the 2002 and 2006 Democratic primaries.

“The people deserve better,” said James, who said her campaign team was troubled by Scott’s finance reports but urged her to focus any attacks on Scott’s performance in Congress.

James points out that, with each successive election, Scott’s campaign has cut checks for more money to his company, its employees and his family: $52,370 in the 2002 election cycle; $218,000 in 2004; and nearly $344,000 in 2006.

Scott clobbered James in both races, but she is contemplating another run in 2008.