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Spotlight falls on political parties' misuse of credit cards

Party-issued credit cards give operatives direct access to political funds

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As charges were levied and details emerged in recent months of lavish spending by national and state political party officials, one thing has become clear: Credit card usage among political staffers can be a recipe for uncontrolled spending disasters. Political party credit card usage in the spotlight

Instead of having to use their own personal credit lines, some political staffers and elected officials have benefited (sometimes directly) from political party-issued credit cards, giving them even more spending power and autonomy to make purchases on behalf of their party and its donors.

Take the case of U.S. Senate candidate Marco Rubio, a Florida Republican. The former state House Speaker used his GOP credit card to make purchases at grocery and wine stores, as well as to pay $1,000 to fix his family car. Florida Republican State Rep. Dean Cannon, slated to be House Speaker in November, also raised eyebrows when he used his GOP credit card to charge six dinners that exceeded $1,000 each. Another staffer charged nearly $1.3 million in expenses, according to a St. Petersburg Times/Miami Herald computer analysis of Republican Party of Florida credit card statements. 

It was announced April 20 that federal law enforcement agencies will now be launching a criminal investigation of elected officials and staff and their use of American Express cards issued by the Republican Party of Florida, according to an article in the St. Petersburg Times. Involved in the inquiry are the U.S. Attorney's office in Tallahassee, the FBI and the Internal Revenue Service.

State political leaders aren't the only ones who've gone on recent spending sprees, either. The Republican National Committee made headlines for questionable expenses, including a charge of $1,946.25 at a West Hollywood strip club. That charge and others were reported by the Federal Election Commission, which tracks all party-related credit card expenses whether they are made on a political party card or an individual's card and reimbursed.

Corporate card privileges
"A political party credit card is just a regular corporate credit card," says Katie Gordon, a spokeswoman for the Republican Party of Florida. "We have a large organization with a lot of staff members who are frequently traveling to different events in different portions of the state. Rather than them having to file a huge personal reimbursement, we were allowing folks to have corporate credit cards that were in their name."

A political party credit card is just a regular corporate credit card.

-- Katie Gordon
Republican Party of Florida spokeswoman

In Florida, the party chairman had handpicked the staffers and officials who would receive the corporate American Express cards, though the recent spending scandal has led to a change in policy.

"There was a lot of publicity around the fact that we had some other elected officials and staffers that had party-issued cards, so now, we just have one card that's in the name of our chief financial officer, and that works better for us in terms of reporting," says Gordon. Everyone else now uses personal credit cards to pay their own party-related expenses, and the party reimburses them, Gordon says.

But the controversy surrounding the Florida GOP credit cards underlines the dilemma that state and national political party leaders face when deciding whether to issue party credit cards. The cards can eliminate the need for a lengthy reimbursement process since the party can simply pay for the charges incurred upon the account directly. But by giving multiple staffers access to corporate cards, there is less of a filter in place to monitor how the party's funds are being spent from day to day.

And that leaves room for greed, says Washington, D.C.-based psychologist R. Nicole Cutts. "When you make decisions, you think about the consequences to yourself. You may not consider there to be a negative effect on yourself when you're spending someone else's money," Cutts says.

You may not consider there to be a negative effect on yourself when you're spending someone else's money.

-- R. Nicole Cutts
Psychologist

Since every state political party has its own leadership structure and campaign finance laws, decisions about how charges are to be made and reimbursed vary by state, says Eric Jotkoff, a spokesman for the Florida Democratic Party. Typically, the state or national party chairman will determine whether the organization would issue party cards and who would receive them. The Florida Democratic Party, for example, does not issue party credit cards. "When we travel, we put it on our own personal credit cards and seek reimbursement and in order to be reimbursed, the expenditure has to be deemed appropriate and signed off by our chairwoman and executive director, as well as the department head," says Jotkoff. 

The Democratic National Committee and the Republican National Committee have payment reimbursement policies that differ from the states. Representatives of the DNC and the RNC refused to comment on whether they issue corportate cards or reimburse staffers for expenses made using their personal credit cards.

Plastic political hanky-panky
Overspending isn't the only way a political credit card can cause embarrassment.

In October 2008, the Arizona Democratic Party went into a tizzy when campaigners discovered a credit card issued to Republican Congressman John Shadegg under a desk at the Democratic Party office. Democrats suspected dirty tricks, but the controversy went away when it turned out a Shadegg campaigner had stopped by to buy some President Obama memorabilia.

And while the Florida Republicans are generating credit card related headlines now, they're not alone in political plastic hanky panky.

In 2008, the Indiana Democratic party's one-time comptroller, Kim Bostic, was sentenced to six months' home detention after opening an unauthorized credit card and using it to spend $62,000 of state Democratic Party money on personal items including clothes, jewelry and out-of-state trips.

Corporate rules
Molly Faust, a spokeswoman for American Express, said the company could not comment on any particular corporate card accounts issued by the company. However, an understanding of the way corporate cards work in general can shed light on the payment policies that exist under party-issued cards.

There is no one-size-fits-all corporate card. Some companies make it the responsibility of the employee to pay their bills directly and get reimbursed, while others issue a single check to American Express each month, which covers the charges made by all employees. Spending controls can also be placed on certain individuals or departments that are issued a corporate card to keep charges under control. However, regardless of who actually pays the bill, the company, or in this case the Party, is ultimately liable for it, not the employee.

An employee's use of a corporate card for personal expenses is between the employee and the company; however, typically employees are expected to pay for their personal expenses. In Rubio's case, of the $100,000 he charged on the Florida GOP credit card, he paid American Express $16,000 that he deemed to be for personal expenses, according to the St. Petersburg Times/Miami Herald analysis.

Bottom line: The party credit card is a tool that is designed to streamline expense management and give key staffers access to the Party's funds for political expenses. "It's really for convenience," says Gordon. So long as spending is kept under control -- and keeping spending under control is not a trait that politicians often display.

See related: Laid off, stuck with company credit card bill, Who owns the rewards on a company card?, Got a corporate credit card? Use it wisely

Published: April 21, 2010


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