Swallow campaign hid donations from IRS, new search warrants show

Published: Thursday, Jan. 2 2014 2:45 p.m. MST

Utah Attorney General John Swallow announces his resignation during a press conference at the Capitol in Salt Lake City on Thursday, Nov. 21, 2013.

Matt Gade, Deseret News

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SALT LAKE CITY — Search warrants in the ongoing criminal investigation of two former Utah attorneys general reveal false statements the John Swallow campaign allegedly made to the Internal Revenue Service to hide campaign donations.

The seven warrants unsealed Thursday provide more insight into the inner workings of Swallow's 2012 run for office, including how some of his staffers disparaged Republican delegates in email exchanges. The 268 pages of documents also plow much of the same ground the Utah House Special Investigative Committee covered in its four-month inquiry.

The committee reported that Swallow's campaign consultant Jason Powers ran contributions through a network of political action committees and nonprofit entities. He used the cash for attack ads against Swallow's Republican primary election opponent Sean Reyes and former GOP lawmaker Brad Daw.

Swallow resigned under fire last month, and Gov. Gary Herbert appointed Reyes to replace him.

The warrants cite a confidential source who worked for Powers' firm, Guidant Strategies.

The informant told investigators that Powers created the PACs to raise money from Internet call centers and payday lenders and to protect Swallow from the bad publicity it would generate. It would also protect donors from "blowback" from the federal government and others.

Powers set up a tax-exempt, nonprofit organization called the Proper Role of Government Education Association, and contributions were moved from it to other PACs for political purposes, the informant said. The law does not require such nonprofit entities to report their funding sources.

At some point the IRS sent a letter to Guidant Strategies asking it to qualify the nonprofit's expenses.

In one warrant, the informant says he/she, Powers and an out-of-state attorney falsified a ledger and a response to the IRS because the organization's expenditures did not meet qualifications for a nonprofit entity.

In addition, the informant believes the donors would have needed to be disclosed and taxes paid had the correct information been given to the IRS. The informant told investigators that "the amount of money due in taxes would have been large, and that money had already been spent."

Powers originally hired the confidential informant in 2009 to work for a PAC in former Attorney General Mark Shurtleff's U.S. Senate campaign, according to court documents.

The informant told investigators that Shurtleff used his 2008 campaign debit card to pay off a $30,000 personal credit card debt.

Seth Crossley, a Swallow campaign staffer who described himself in the warrants as Swallow's "handler" and "personal assistant," told investigators he tried to persuade him not to take donations from the telemarketing industry because it was "corrupt" and the money wasn't needed to win the race.

Crossley said Swallow was very "hands on" in the campaign and had the final say on everything.

Investigators also found a copy of an email in Crossley's account from Shurtleff to Powers apparently sent during the state Republican Party convention in April 2012. At the time, delegates were voting whether to nominate Swallow or Reyes as the GOP nominee for attorney general.

"Let me take the stage with John and in 15 seconds tell 4,000 delegates that Reyes is a liar, a dirty-tricks politician & would be 'Utah's Worst AG' (Or words to that effect.)," the email states.

Swallow and Reyes ultimately squared off in a primary election, which Swallow won handily.

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