Wisconsin’s Walker Routed Cash to Outside Group

Wisconsin Governor Scott Walker diverted campaign contributions to the conservative issue-advocacy group Wisconsin Club for Growth, lawyers for the special prosecutor investigating him said in court papers.

The probe into whether Walker and those working on his 2012 recall election violated Wisconsin campaign finance laws was put on hold in May by a federal judge in Milwaukee after a Club for Growth executive sued claiming it infringed political activity protected by the U.S. Constitution.

Special prosecutor Francis Schmitz has appealed that ruling. Documents in the case were unsealed yesterday by the U.S. Court of Appeals in Chicago that is set to hear arguments next month on whether the investigation can resume.

Walker is one of a trio of potential 2016 Republican presidential candidates shadowed by investigations into potential wrongdoing. Texas Governor Rick Perry last week was indicted in an abuse-of-power case and has pleaded not guilty. New Jersey Governor Chris Christie and his allies are being probed by federal prosecutors over his subordinates’ orders to create traffic tie-ups at the George Washington Bridge to punish a mayor who didn’t support his re-election.

Walker, now completing his first term, is seeking re-election this year in a race against Democrat Mary Burke, a former executive for the closely-held Trek Bicycle Corp.

Probe Blocked

One of the documents unsealed yesterday was an April 15 Milwaukee federal court filing opposing U.S. District Judge Rudolph Randa’s subsequent decision to block the probe. In it, lawyers for Schmitz described evidence gathered by an investigator they said underpinned their good-faith belief that Walker and others plotted to shunt donations away from his official campaign organization and to the issue advocacy group.

Because such organizations are considered social-welfare groups and have tax-exempt status, they’re prohibited from making expenditures in coordination with a specific candidate or political party.

Club for Growth sponsored ads supporting Walker in 2011, according to the unsealed filing.

Walker, according to that filing, solicited large sums of money from would-be donors with instructions that the money be given to Club for Growth.

Contributors to Club for Growth included SAC Capital Advisors LP founder Steven A. Cohen, who gave $1 million one month after another SAC executive met with the governor in 2012, according to the documents.

Prosecutor’s Theories

Randall Crocker, an attorney for the special prosecutor, said in a June statement after other probe-related documents were unsealed that while they outlined Schmitz’s theories, they didn’t establish the existence of a crime.

“They were arguments in support of further investigation to determine if criminal charges against any person or entity are warranted” and not a finding of wrongdoing, Crocker said. “At the time the investigation was halted, Governor Walker was not a target.”

Alleigh Marre, a spokeswoman for the Walker campaign, cited that statement yesterday and said Friends of Scott Walker wasn’t a party to the Club For Growth lawsuit.

“The prosecutor’s evidence does not identify a single expenditure by the Wisconsin Club for Growth relating to Governor Walker’s recall election, much less one coordinated with the Walker campaign,” said David B. Rivkin, an attorney for the organization and its executive, Eric O’Keefe.

Policy Goals

The Constitution “guarantees Americans the right to join together to advance their policy goals,” Rivkin said in an e-mailed statement.

Jonathan Gasthalter, a spokesman for Cohen, declined to comment on the listing of Cohen as a contributor to the group.

The appeals court is set on Sept. 9 to consider the prosecutor’s bid to reverse Randa’s ruling.

The case is O’Keefe v. Schmitz, 14-1888, U.S. Court of Appeals, Seventh Circuit (Chicago). The lower court case is O’Keefe v. Schmitz, 14-cv-139, U.S. District Court, Eastern District of Wisconsin (Milwaukee).

Before it's here, it's on the Bloomberg Terminal.