Cain 2012 Corruption Scandal: GOP Camp. May Violate Election, Federal Tax Laws

Mark Block and Linda Hanson, two top campaign aides in Herman Cain's presidential bid, have embroiled the GOP hopeful in yet another scandal, this time one involving corruption, with violations of both election law and federal tax law suspected through conservative groups like Prosperity USA.

No Quarter (Milwaukee Journal Sentinel) broke the story Oct. 30, which was swallowed up in the fervor over accusations of sexual harassment. Now, however, news of illegal corporate funding has begun to be picked up by blogs and local news sources on Oct. 31, and may be yet another cloud cast over Cain's 2012 presidential campaign.

Hanson and Block, the campaign manager now infamous for the Cain smoking ad that went viral last week, ran a private Wisconsin-based corporation that footed the bill for thousands of dollars in iPods, chartered flights and other expenses that helped their candidate get his campaign off the ground--something that internal sources and legal documents indicate might breach both federal tax and campaign laws in the United States.

As a tax-exempt nonprofit, Prosperity USA cannot help finance political campaigns. Yet internal financial records show that Prosperity USA is owed $40,000 by FOH (Friends of Herman Cain) for a variety of items purchased in February and March 2011, a month after Cain began taking donations for his presidential bid.

No Quarter reports that Prosperity USA is in fact a company owned Block and Handon, Cain's current chief of staff and deputy chief of staff, respectively. Prosperity USA now appears defunct, and may have been little more than a cardboard company to help fund the 2012 presidential run by the former Godfather's Pizza CEO.

The GOP hopeful's federal election filings, however, make no mention of any debts, and the figures in financial documents obtained by No Quarter don't match payments made by the candidate's campaign. It is not known whether Cain ever made good on his debts to Prosperity USA.

In addition to indirect campaign contributions, Prosperity USA also paid as much as $100,000 to the Congress of Racial Equality in mid-January. Cain was a featured speaker at the conservative black organization's Martin Luther King Jr. dinner, fresh off his first campaign efforts, and documents show the substantial donation was made to coincide with his guest appearance.

I Don't See How They Can Justify This

Election law experts say the transactions between Cain and Prosperity USA, which billed itself as a tax-exempt non-profit, are questionable at best and illegal at worst.

If the records accurately reflect what occurred, this is way out of bounds, said a Washington, D.C.-based election lawyer. The lawyer, who advises many Republican candidates and conservative groups on campaign issues, asked not to be identified.

Michael Maistelman, a Wisconsin campaign attorney, is similarly incredulous.

The number of questionable and possibly illegal transactions conducted on behalf of Herman Cain is staggering, he said. Maistelman is a Democrat who has represented politicians from both parties on campaign issues.

I just don't see how they can justify this, said another national election expert who works with GOP candidates. It's a total mess.

In a signature move of the Herman Cain campaign thus far, Block and Hanson declined to respond directly to the most recent scandal, choosing instead to send an emailed response promising to answer the charges at a later date.

Need to schedule time to review questions, Block said in an email sent on Friday. Obviously in the midst of a Presidential campaign I cannot drop everything.

Matt Seaholm, who replaced Block as director of the group's state chapter this year, also declined to discuss the group's finances. I'll leave that to the national office, Seaholm said, in an echo of Block's own comments regarding Cain's scandal with the National Restaurant Association.

A spokesman for Americans for Prosperity in Virginia did not return calls Friday.

Block's Dirty History

Block, 57, has proved to be far more of a campaign liability than an asset to Cain. Before his smoking ad went viral, he was best known in Wisconsin for previous legal entanglements involving the election of former state Supreme Court Justice Jon Wilcox in 1997, settling election law violations charges by paying a $15,000 fine and dropping out of Wisconsin politics for three years.

Block appeared in the news again via his connection to the Koch Brothers and their nonprofit Americans for Prosperity, which helped organize the Tea Party movement in America.

Block ran a state chapter of Americans for Prosperity, and it was through the organization that he met Cain and encouraged him to run for national office. Block has also founded a series of spin-off groups from Americans for Prosperity. Groups like the Wisconsin Prosperity Network are legally separate from the main organization, but still work, through umbrella groups that spend more than $6 million a year underwriting conservative organizations, to turn Wisconsin and other states red.

Illegal Charges Include Plane Tickets, iPads

Block's role in the Wisconsin Prosperity Network may end up looking as dirty as the current situation with Prosperity USA. As tax-exempt nonprofit groups, these organizations cannot have direct political involvement, including campaign donations, and may be charged with illegal corporate funding in the months to come if charges stick.

Insiders within Block's organizations, of which he is always the head, say all the Prosperity Networks function as an umbrella organization, raising hundreds of thousands of dollars from prominent conservatives throughout the state, funneling expenses through miscellaneous purchases in order to fund movements like Cain 2012.

This summer Michael Dean, the attorney for Wisconsin Prosperity and Americans for Prosperity, abruptly resigned in a letter filed with the State Department of Financial Institutions, and sources say he also contacted the Internal Revenue Service regarding the group's application for tax-exempt status.

One supporter, who asked his name not be used because he still supports Cain's campaign, expressed distress at the news that the FOH funds had been obtained underhandedly, and that the money raised by Block's organization had not been used for its intended purposes.

Both Wisconsin Prosperity Network and Prosperity USA were operating in the black during the first half of 2010, but are now hugely in debt. Detailed accounts reveal that the Cain campaign owes the two groups nearly $15,00 for an unnamed Atlanta invoice, roughly $17,000 for chartered flights, and $5,000 for travel and meetings in Las Vegas, Houston, Dallas, and across Iowa and Louisiana. It also shows some $3,700 billed for iPads purchased for the Cain campaign staff in early January.

Other charges include $5,000 in costs for Cain speech at a September 2010 Right Nation rally in Chicago, as well as Block's own trip to Washington, D.C. to meet with David Koch. Krista Branch, who recorded the unofficial Tea Party anthem I am America, is also allegedly owed money by the Wisconsin group, roughly $3,000.

Front for Koch Brothers?

Records also show $150,000 in loans this year from individuals who could not be identified, leading some to suspect that rumors of the Koch Brother's involvement in Cain's campaign may not be as unfounded as FOH asserts.

In an interview this morning to discuss Cain's sexual harassment scandal, MSNBC host Chuck Todd also asked Block whether Cain was being funded by the Koch Brothers. Block vehemently denied the campaign was a front for millionaire Tea party interests, and joked that if they [the Kochs] are donating to us, their payments are past due.