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The NRCC mess

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By Michelle Malkin  •  March 14, 2008 08:41 AM

I’ve said many times that Republicans can’t demand that Nancy Pelosi clean her House until their own house is in order. Yesterday, the NRCC sent an e-mail detailing a massive fraud scheme by one of its own. Here are the full statement and findings.

Oy:

NRCC Chairman Tom Cole made the following statement and distributed the following update on the current investigation and apparent accounting irregularities:

“This afternoon I took the opportunity to brief the Republican congressional leadership and the NRCC’s Executive Committee on our ongoing investigation of apparent accounting irregularities and to detail for them the informational notice submitted to the FEC earlier today, which reflects an adjusted cash on hand as of January 31, 2008.

“Paramount to my chairmanship is the integrity and success of the NRCC. However, the evidence we have today indicates we have been deceived and betrayed for a number of years by a highly respected and trusted individual. From the moment we learned that bogus financial statements had been submitted to the bank on our behalf, we took decisive and speedy action by contacting the FBI, which opened a criminal investigation.

“It is my goal to be open and candid with the facts of this matter and to assure our members, our supporters and our staff at the NRCC that every effort is being made to prevent such a fraudulent act from happening again.”

Update on Investigation of Apparent Accounting Irregularities

Presented to the NRCC Executive Committee of The National Republican Congressional Committee

March 13, 2008

The following update details the preliminary findings of the investigation undertaken at our request, beginning on January 30, by the law firm Covington & Burling LLP and reflects factual information obtained from PricewaterhouseCoopers, the firm retained by Covington to conduct a forensic investigation of the NRCC’s financial records. We refrained from making extensive public comments until now so as not to compromise the investigation being conducted by the FBI. We understand that the FBI’s investigation has now progressed to a point where such public comment would no longer interfere with the investigation. Accordingly, the NRCC is providing this update on the status of its own internal investigation. It is important to note that this report is preliminary, and that the investigation is ongoing and the information provided here may change and be supplemented when the investigation is completed.

Overview

We learned January 28 that, contrary to prior assurances, no audit of the NRCC’s 2006 financial statements was being conducted. Chris Ward, whose duties included coordinating completion of the NRCC’s annual audit for calendar year 2006, informed the chairman’s office that no audit had been done, after repeated inquiries over a number of months from the NRCC leadership, including the chairman’s office and the head of the NRCC’s oversight committee.

Shortly thereafter, we learned that Ward had apparently fabricated and submitted 2006 financial statements to the NRCC’s bank. We then retained Covington & Burling LLP and, upon their advice, we reported these facts to the FBI, which opened a criminal investigation.

Since then, and as a result of the investigation being conducted, we have learned that the last year for which the NRCC obtained a completed independent audit report was calendar year 2001. That audit was conducted and completed during 2002. It appears that after becoming treasurer in 2003, Ward submitted to the NRCC’s bank and to NRCC leadership bogus audit reports for 2002, 2003, 2004 and 2005. An additional bogus audit was submitted to the NRCC’s bank for 2006.

We terminated Ward’s consulting duties January 28, 2008.

For background:

Ward had served at the committee since November 3, 1995 and as treasurer since 2003, when he became responsible for coordinating the NRCC audits.

Ward stepped down as treasurer in July 2007, but remained as a consultant to the NRCC, with duties that included coordinating completion of the 2006 audit.

When we learned of the apparent irregularities, Chairman Cole directed that an outside firm be retained to conduct an investigation.

Covington & Burling LLP was retained January 30 and has been conducting an internal investigation.

After Covington’s initial review, the firm advised the NRCC to refer the matter to the FBI and to inform the FEC. Covington also retained PricewaterhouseCoopers to conduct a forensic investigation of the NRCC’s financial records.

Contrary to media reports, the FBI has not been to the NRCC office during the course of this investigation nor have they operated out of the NRCC offices.

Unauthorized transfers of funds

Based on analysis conducted to date, it appears likely that over a period of several years Ward made several hundred thousand dollars in unauthorized transfers of NRCC funds to outside committees whose bank accounts he had access to, including joint fundraising committees in which the NRCC participated. He also appears to have made subsequent transfers of several hundred thousand dollars in funds from those outside committees to what appear to be his personal and business bank accounts. Those unauthorized transactions date back to at least 2004. The exact dollar figures are currently a moving target, and as the investigation progresses, it is entirely possible that these figures will change, either by increasing or decreasing. The forensic investigation has also noted numerous instances in which the unauthorized transfers were either not accurately reported, or were not reported at all, on FEC reports.

Additional financial findings

The internal investigation also has determined that there is a discrepancy between the NRCC’s cash on hand as reported and its actual cash on hand over the last several years. The findings are as follows:

At year end 2006, the NRCC’s actual cash on hand was approximately $990,000 less than the amount reported to the FEC.

The actual cash on hand as of the NRCC’s most recent FEC report for January 31, 2008 (filed on February 20, 2008) was $740,000 less than the amount reported to the FEC.
We suspect, but have not yet confirmed, that some of that discrepancy was due to unauthorized transfers of funds.

We are filing with the FEC today an informational notice reflecting that as of January 31, 2008, the NRCC’s cash on hand was $5,669,997.24. This notice is based on the best information currently available to the NRCC.

Additionally, we have learned the amount reported as outstanding on the NRCC’s line of credit was $200,000 less than the actual amount owed.

Timing for completion of forensic investigation

We emphasize that this information is preliminary, and is based only on the internal investigative work conducted to date. Forensic investigation work takes significant time. We currently anticipate that this investigation will take an additional 6-8 weeks, though it is possible more time will be needed.

Internal controls

Beginning in January, 2007, Chairman Cole and the NRCC have worked hard to improve and strengthen financial controls. They have reviewed all policies and procedures and are implementing safeguards to prevent such events from occurring in the future.

The Washington Post has more, noting that “Before yesterday, the committee, which raised $49 million in 2007, had not acknowledged that any money was missing.”

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