One day before the Georgia Senate runoff elections — and two days before the Capitol insurrection — a leadership PAC attached to Sen. Ted Cruz, R-Texas, paid hundreds of thousands of dollars to a mystery company that had previously bought copies of Cruz's book, according to recent filings with the Federal Election Commission. The expenses raise questions about whether the controversial conservative senator (and Cancún frequent-flyer) used those political campaigns, and Donald Trump's attempt to subvert the democratic process, to raise money for himself. That could push the FEC to issue a ruling on a pending issue that could have consequences for former President Donald Trump's fundraising.
Over the course of 2020, the Cruz-affiliated Jobs, Freedom, and Security PAC paid $1.2 million — nearly 80% of its operating budget — to a company called Reagan Investments LLC for "sponsorship advertising." The only other committee to register any disbursements to that company was Trump Make America Great Again, for a fundraising promotion for Cruz's books in December, according to The New York Times. However, the Trump group clearly marked the payment for "collateral: books"; campaign finance experts told Salon that the PAC's payment classifications — all of them for "sponsorship advertising" — were unusual and opaque.
On Jan. 4, 2021, the day Cruz traveled to Georgia before the runoff elections, his leadership PAC reported a $240,000 expense for "sponsorship advertising" to Reagan Investments, which appears to correlate with another series of small-dollar donations that poured into the PAC over the next few days. It isn't clear how much of the funds raised, if any, went to Republican runoff campaigns: Cruz's PAC only spent a few thousand dollars in support of former Sen. Kelly Loeffler. In fact, most of the contributions rolled in after the runoffs were over and as the events surrounding the Jan. 6 insurrection were playing out, while Cruz joined a handful of Republican Senators to object to the counting of Electoral College votes.
Legal experts tell Salon that if the money was for promotional book sales, as the filings may suggest, then the leadership PAC could be using Reagan Investments as a pass-through to allow Cruz to keep the royalties, which are generally between 10% and 15% for hardcover books, and about half that for paperbacks. Political candidates are not allowed to do that through their campaign committees. But the identity of Reagan Investments itself poses a mystery.
The PAC's filings claim that Reagan Investments LLC is located in an office building across the street from the Texas State Capitol in Austin. The company does not appear in Texas business registries. OpenCorporates records, however, show that a company by that name was organized in Missouri on Jan. 23, 2020 — two days after the PAC reported its first-ever payment to the company, of about $57,000. The agent on that registration, James Thomas III, was involved with a scheme that unlawfully funneled dark money from a conservative nonprofit to a political committee, resulting in a $350,000 FEC fine in 2018.
In a phone interview, Thomas claimed he was simply the organizing agent and could not immediately recall who operated the company, or its purpose.
The company's address in Austin, however, matches that of an office suite occupied by a Missouri-based consulting firm called Axiom Strategies, founded in 2005 by Jeff Roe, who managed Cruz's ill-fated 2016 presidential campaign and advised his successful 2018 re-election contest against Democratic challenger Beto O'Rourke. Roe was also connected to the dark money scheme, and although the FEC did not cite Roe for a violation, Thomas told investigators that he "primarily took direction" from Roe.
Roe is also the registered agent for Axiom's Texas branch. Salon visited the Austin suite, which appeared functional and furnished, but unoccupied. Jobs, Freedom, and Security PAC has also paid Axiom directly, according to federal filings.
Throughout the first half of 2020, while Jobs, Freedom, and Security PAC spent hundreds of thousands in monthly advertising dollars with Reagan Investments, the PAC raised only a fraction of that amount, per FEC records, and it is not immediately clear what Cruz was paying the company to do. In July, the committee began accepting regular donations in the thousands of dollars, but in October, after Cruz published his new book, "One Vote Away: How a Single Supreme Court Seat Can Change History" — which coincided with the death of Justice Ruth Bader Ginsburg — the PAC saw a sudden and sustained influx of flat donations in the kind of small-dollar amounts that typically align with book promotions and packages. Those receipts continued to come in after the election and through December, when the Trump campaign launched its cross-promotion.
Cruz's leadership PAC also supports active candidates, and donated directly to a number of campaigns for the 2020 cycle. But it reported only $109,000 in independent expenditures, all of that in a June donation to support Texas congressional candidate Raul Reyes in a Republican primary which he lost.
Furthermore, the PAC reported that it paid $615,000 to the Republican fundraising platform WinRed for credit card processing fees on Jan. 12, a week after the Reagan Investments advertising payout, after having paid WinRed only a few thousand dollars for all of 2020. The PAC's receipts total more than $758,000 in January alone, about 50% more than it raised from 2019 to 2020 combined.
However, experts told Salon that without further clarification, the vague "sponsored advertising" classification stands in the way of any conclusions.
"Sen. Cruz spending nearly a quarter million dollars on 'sponsorship advertising' is certainly odd and raises several questions into his leadership PAC's financial behavior," said Jenna Grande, press secretary for government watchdog Citizens For Responsibility and Ethics in Washington, the group that filed the original FEC complaint detailing the dark money scheme involving Thomas and Roe. "We would certainly welcome an explanation from him about these suspicious expenditures," Grande added.
Brendan Fischer, director of federal reform at the Campaign Legal Center, echoed the point.
"I don't know that we can conclude that Reagan Investments LLC is a pass-through for book purchases," Fischer told Salon in an email. "Trump MAGA described its payments to Reagan Investments as 'collateral: books,' whereas Cruz's leadership PAC described every payment to Reagan Investments LLC as 'sponsorship advertising.' Just because Trump's payments were for a specific purpose doesn't mean we can conclude that Cruz's payments were for that same purpose when the payments were reported differently."
Fischer continued: "That said, I really don't know what 'sponsorship advertising' means, and it looks like Cruz's leadership PAC was the only political committee that reported payments for that purpose in the entire 2020 election cycle. Cruz's failure to meaningfully disclose how his leadership PAC is spending its money means we can only guess about where the million-plus ultimately went."
If Reagan Investments is a means for Cruz to collect publishing royalties, the senator would appear to be converting donations to personal use and possibly filing false FEC reports. If that were the case, Jeff Roe could potentially be considered a co-conspirator. Candidates who sponsor leadership PACs are generally allowed to use donor funds for personal expenses, meaning Cruz could keep any royalties, but the FEC currently has a pending review of a related question: Whether the personal use prohibition should extend to leadership PACs that belong to active candidates, such as Cruz.
An unfavorable ruling could have implications for Trump's leadership PAC, Save America: If the former president decides to run again in 2024, he may not have unfettered personal access to the millions of dollars in the PAC's account, and that could circumscribe his ability to spend those contributions on his personal business empire.
Sales for Cruz's 2015 book, "A Time for Truth," drew scrutiny after The New York Times refused to put it on the bestseller list, citing "strategic bulk purchases" that appeared inorganic, prompting Amazon to push back on the paper's claim. HarperCollins, that book's publisher (Cruz's new book was published by the conservative-oriented house Regnery), said it had "investigated the sales pattern" but found "no evidence of bulk orders or sales through any retailer or organization." The Cruz campaign immediately put out a press release demanding that the Times either offer evidence or apologize.
"The Times is presumably embarrassed by having their obvious partisan bias called out. But their response — alleging 'strategic bulk purchases' — is a blatant falsehood," campaign spokesperson Rick Tyler told Politico at the time. "The evidence is directly to the contrary. In leveling this false charge, the Times has tried to impugn the integrity of Senator Cruz and of his publisher HarperCollins."
The Cruz campaign did not immediately respond to Salon's requests for comment, by email and phone. The campaign's outgoing voicemail informs callers that book orders will take four to six weeks to fulfill, citing an allegedly high demand.