Did the DNC Get an Illegal Campaign Loan from Bank of America? (PJM Exclusive)

Shortly after Labor Day, as polls continued to sink, the Democratic National Committee (DNC) realized it needed a cash infusion for the upcoming midterm elections. Its chairman, former Virginia Governor Tim Kaine, turned to the Bank of America to secure a $15 million revolving credit line. Then, in the middle of this month, the Democratic Congressional Campaign Committee (DCCC) got another loan from BofA for an additional $17 million.

What was their collateral? It turns out, not much.

The DNC claims their collateral was an intangible piece of property -- its donor mailing list. The DCCC only cites unnamed "assets.” Neither party organization possesses real estate even close to cover the $32 million. The DNC’s headquarters is owned by another entity. Even it was put up as collateral, its market value was last estimated at only $13.7 million.

Were the Bank of America deals legitimate, arms-length transactions, or were they cozy sweetheart deals in which nothing was really put up to secure a $32 million loan?

And if it was the latter, could it be considered an illegal campaign contribution from the largest bank holding company in America?

There also is troubling evidence that two days before closing on the loan transaction, the DNC changed its own privacy provisions to allow the selling or sharing of private donor data.

BofA has been a longtime friend of Democrats. In the 2008 election cycle, BofA gave its largest single campaign contribution to then-Senator Barack Obama. According to Bloomberg News, BofA’s new CEO, Brian Moynihan, is considered Obama’s top political ally on Wall Street.

On the eve of the midterm elections, the appearance of preferential loans from cozy Wall Street bankers could play badly with the electorate. What message does a largely unsecured $32 million credit line for the Democratic Party send to thousands of cash-starved small businesses across the nation who can’t secure any credit even with tangible assets?

The findings are part of an exclusive Pajamas Media investigation.

The DNC loan agreement as posted online by the Federal Election Commission (FEC) and signed by former Virginia Governor Tim Kaine (D) on September 16, 2010, says the loan collateral included: “All electronic mail ('E-mail') addresses and other contact lists, records and other Information (electronic or otherwise) relating to contributors, supporters and subscribers owned by any of the Borrowers.” The borrowers in this case were the DNC and the DNC Services Corporation.

The loan agreement further stipulates that if the Democrats defaulted, Bank of America would be entitled to “proceeds from any fundraising activity, refunds, reimbursements, or proceeds from the rental or sale of mailing, contact or subscription lists or Information (electronic or otherwise).”

One key to understanding the problems behind the $15 million loan is determining what the donor list is actually worth. The DNC filings with the FEC do not attach any independent appraisal documents or list broker evaluations to establish the list’s fair market value.

Senator John McCain once tried to use his presidential donor list as collateral for a loan. He valued his Republican donor list as worth $3 million. The bank rejected the loan.

Trying to fix a value on an intangible mailing list is very difficult.

“Donor lists do have value, but very fleeting value,” Ken Boehm, chairman of the National Legal and Policy Center, told Pajamas Media. “Lists do deteriorate and $15 million is an awful lot of money. So if the bank ends up with the list because the party is broke, where are they going to get their money?”

A senior executive who is part of a national U.S. bank told Pajamas Media that a data list would be a weak basis for a $15 million loan. He gave his comments on the grounds that he would not be publicly identified. He said he was “somewhat skeptical of a donor list as adequate collateral for a $15 million credit line.”

But if the value is not $15 million, it could be considered a substantial campaign contribution to the Democratic National Committee. And that could be illegal.