Two Republican-owned national political consulting firms are demanding the Minnesota Republican Party settle hundreds of thousands of dollars in unpaid bills from the 2014 campaign, a sign the party's long-running financial struggles may not be totally resolved.
In e-mails to state GOP Chairman Keith Downey, top executives at Salt Lake City-based Arena Communications and the Kansas-based Singularis Group blasted the Minnesota Republican Party in unusually frank language. They said the party has failed to pay its bills for direct mail and other political communications on behalf of federal and state GOP candidates running for office in Minnesota last fall.
Downey said Monday that the party has paid all but 20 percent of its campaign-related debt to vendors. "We feel confident about the financial footing of the party," he said. Asked how much the party still owed vendors, Downey put the figure at about $300,000. That's included in the total that the party owes to creditors, which at the end of January was $1.47 million. Peter Valcarce, founder and manager of Arena Communications, wrote in a Feb. 23 e-mail to Downey that his firm is still owed $211,473 for work it did for the party to aid the U.S. Senate campaign of Mike McFadden and the congressional campaign of Stewart Mills in northeastern Minnesota.
"I was dismayed to read your claim in the MN GOP Annual Report that 'We were able to support our endorsed candidates through the primary and with a statewide victory program, while simultaneously meeting our financial obligations and paying down debt,' " Valcarce wrote to Downey. "I can attest this is a total falsehood."
Valcarce confirmed Monday he wrote and sent the e-mail to Downey.
"It's the first time I've taken a step like this with a state party in the almost 20 years I've been in business," Valcarce said. His firm has provided direct mail and online political communication services to several Republican presidential candidates, dozens of GOP candidates for governor and Congress nationwide and numerous state Republican parties.
Downey got a similar e-mail last Thursday from Kristian Van Meteren, owner of the Singularis Group, another Republican direct-mail firm. Van Meteren did not return a call and e-mail message seeking to confirm he wrote the e-mail, which the Star Tribune obtained from two separate sources. It did not reveal how much the firm still feels it's owed by the Minnesota GOP.
"To be frank, we believe that the Minnesota GOP has dealt very dishonestly with our firm over the past four months," Van Meteren wrote. Singularis employees who contacted Minnesota GOP staff about outstanding invoices were told they were not received until several weeks after the election, Van Meteren wrote, adding: "That claim is demonstrably false."
Under normal procedure, the party would cover costs for some or all of the contracted work on behalf of McFadden, Mills and other Republican candidates with pass-through donations from independent political groups such as the National Republican Senatorial Committee, the National Republican Congressional Committee and others.
"Apparently, those monies went to other projects instead of paying your incurred debt obligations," Valcarce wrote to Downey.
Downey said political parties often need a few months after elections to catch up with campaign bills. He said he didn't know offhand how much of the total vendor expense was meant to be bankrolled by money from third-party groups and how much from party funds.
"Do we need to get caught up on the invoices of our vendors? Certainly. Is it in process? Yes," Downey said. He said it's typical for party officials and vendor representatives to confer back and forth about such debts after the election.
"The decision to play this out publicly, I don't know that I totally understand that," he said.
Fixing the finances
A former state representative from Edina, Downey took over the party two years ago as it climbed out of near-bankruptcy brought on by crushing debt amassed under former chairman Tony Sutton. Earlier this year, the party reported about $1.47 million in debt, down from nearly $2 million at the end of Sutton's tenure, and Downey said a focus for 2015 would be shrinking that number further.
In December, campaign finance statements revealed that the party expanded a line of credit at Alliance Bank and owed $75,000 on that for loans taken out in October and November. At that time, Downey said that "we are on a very manageable path. We got into a position where, financially, we are able to spend money and do everything we possibly could on behalf of our candidates."
Republican activists are scheduled to meet on April 11 to elect a party chairman; Downey is running unopposed for another two-year term.
In an e-mail last Thursday to the party's executive board members, Mike Lukach, who managed Mills' unsuccessful campaign against U.S. Rep. Rick Nolan, raised concerns about the money still owed to Arena Communications.
"I believe you, as the executive board have been misled about significant portions of the party's debt," Lukach wrote in the e-mail, which he confirmed to the Star Tribune.
Downey said his contention that he restored financial stability to the party holds up.
"If you look at the financial position compared to when I came in, it's night and day," he said.