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Updated Aug 17, 2014 - 8:28 am

Officials: Arizona Free Enterprise Club violated election law

PHOENIX — State elections officials have said the Arizona Free Enterprise
Club has broken election laws by not declaring itself a political committee.

State Elections Director Christina Estes-Werther sent a formal notification toe
the group Friday, saying there was “reasonable cause” indicating the
corporation failed to report all campaign contributions and expenses and isn’t
primarily spending money on social welfare.

Fountain Hills resident Paul Ryan filed a complaint against the group July 31.
Ryan said the Free Enterprise Club claims it is a nonprofit corporation but has
spent more on candidate advocacy.

Nonprofits can engage in political activities without disclosing donors and
spending as long as their primary purpose is related to social welfare rather
than attempting to influence elections, according to federal law and IRS
requirements.

Corporate entities that accept donations and exist primarily to influence
elections are required to register as political action committees and share
their donor lists.

According to the Free Enterprise Club, the group made more than $3 million in
total expenditures between January 2013 and Aug. 8 of this year. Of that, $1.2
million, about 37 percent, of the expenditures were spent on election cycle
activity since June 26.

But the Secretary of State’s office argues that the group improperly failed to
provide a specific breakdown of the remaining 63 percent of its expenditures.
The group provided a general breakdown instead, listing spending categories
including public education and outreach, ballot measure campaigns, and public
policy.

The club said the Secretary of State’s office was not authorized to enforce
federal requirements, according to the response section of reasonable cause
notice filed by Estes-Werther.

The matter will now go to Attorney General Tom Horne’s office for enforcement
action.

Michael Liburdi, the group’s attorney, did not respond to a request for comment
Saturday morning. A phone call to the group Saturday afternoon rang unanswered
and a voicemail was not immediately returned.

The Free Enterprise Club describes itself as a free market policy and lobbying
group focused on promoting the state’s economy.

State elections officials have been looking into whether other groups have been
spending money to sway political races without registering as political
committees.

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