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Governor's Club funds impossible to trace

Governor's Club funds impossible to trace


It's a club without a clubhouse, a nebulous place where money buys access and details are hard to find.

The Governor's Club has been a discrete part of political fundraising in South Dakota for more than 30 years. For a $1,000 donation, contributors buy a place at the table - and a position of potential influence - with South Dakota's governor at club events that are not open to the general public.

Begun in the 1970s to help cover political expenses for Democratic Gov. Dick Kneip, the club has grown through four Republican administrations into a fundraising device that boosts the coffers of the state party and benefits the governor in ways that are hard to track and almost impossible to quantify.

Some critics call the money raised through the Governor's Club a "slush fund" that evades the level of openness required of direct contributions to the governor.

Democratic state Sen. Ben Nesselhuf of Vermillion said that lack of transparency creates a shadowy environment where influence peddling can occur beyond public scrutiny and possibly in ways that are bad for the state.

"We have no idea who's donating or what sort of favors they may be getting out of that," he said. "That's the entire point of transparency, so you can connect the dots and the public can decide. If it's perfectly innocent, there's no problem."

Gov. Mike Rounds refused a Journal interview request for this story. The governor did say through spokesman Joe Kafka that the club is legal, directing further questions to the state Republican Party.

"The GOP uses some of it to pay the governor's expenses when they are related to political functions or events, not state business," Kafka wrote in an e-mail. "He also gets campaign donations from the fund, just like many other Republicans who are either in office or seeking office. Those donations are listed in campaign finance reports."

They are not listed as Governor's Club donations, however. And because the party deposits them in a federal fund it controls rather than its state fund, they don't appear on state campaign-finance reports. They can be found, including name, address and amount of contribution, on the South Dakota Republican Party's report on the Federal Election Commission's Web site:

But the Governor's Club fund doesn't actually exist at all, any more than the club itself has a regular meeting place. That's another reason the money is so hard to track. It's also a reason people are confused about what it is and how it's used.

"It's not a distinct fund," Secretary of State Chris Nelson said. "It's simply a fund-raising mechanism."

Lucas Lentsch, executive director for the South Dakota Republican Party in Pierre, said it would be wrong to presume that $1,000 club members get "perks or additional access" to the governor.

"The governor simply attends the fund-raising functions," Lentsch said in an e-mail to the Journal. "Last year, there was one 'Governor's Club' fund-raising event. I don't believe there have ever been more than three in a year."

Lentsch said the name "Governor's Club" leads some to believe governor has a separate fund which he controls.

"Legally, all the governor can do is ask for money from the South Dakota Republican Party, and the party has control over who it gives money to and how much," Lentsch said.

Nesselhuf is less troubled by the format of the club than he is by the lack of transparency in the flow of its money. As it operates now, the state Republican Party reports the $1,000 donations by club members by name and hometown, along with many other contributions of various sizes, to the Federal Elections Commission. In the 2007-08 cycle, the state GOP reported a total of $1.3 million in individual contributions. Governor's Club donations are not identified within those reports, but most of the several hundred individuals listed on the reports with $1,000 or more are probably in the club.

The club member donations mix with other donations to the party, which then makes larger aggregate contributions to the governor, as well as other candidates. There is no way at that point for the public to tell how much money donated through the Governor's Club went to the governor, or which individuals made the original contributions.

"The party will write down that donation as an expense, and that's the end of the trail," Nesselhuf said. "There's really no controls over that fund itself. We don't know where the money starts. We don't know how it's spent. We don't know anything."

But if most of the $1,000 donors are members of the club, it raises hundreds of thousands of dollars a year.

Former Gov. Bill Janklow split the club proceeds with the party. But Lentsch said Rounds doesn't receive a set percentage of the club proceeds, so it's unclear how much Rounds has received from the club in his six years in office. Neither Rounds nor Lentsch will estimate the donations.

State Senate Democratic leader Sen. Scott Heidepriem of Sioux Falls, a possible candidate for governor in 2010, wants the campaign reporting laws changed to "isolate the Governor's Club and require it to report separately" on campaign finance forms. Nesselhuf succeeded two years ago in adding such provisions to a campaign reporting bill in the Senate, but they were stripped from the bill in a conference committee.

Lt. Gov. Dennis Daugaard, who is a candidate for the Republican nomination for governor in 2010, said he wasn't clear on how the Governor's Club operates.

"If I'm fortunate enough to be elected, I'll talk to the party about it," he said. "I don't expect that I'll look for support from the party in the way, maybe, that it's operating now. I do expect I'll help the party raise money."

Senate Republican leader Dave Knudson, another candidate for governor, has been a member of the Governor's Club with Janklow and Rounds. He said members were invited to periodic meetings with the governor and sometimes cabinet members to talk about state government and policy issues.

"With Janklow, I was under the impression that half of it (club donations) went to the state party and the other half basically was available to defray expenses the governor had," Knudson said.

It makes sense to have some source of money available to pay for expenses that are outside the governor's non-partisan duties, Knudson said.

"The best example was the Republican Governor's Association," he said. "If he went to that meeting, I believe Gov. Janklow never charged the state, since it was a partisan association, as opposed to the National Governor's Association."

But governors have a great deal of freedom in spending the Governor's Club money once it arrives in their campaign funds, said Rick Hauffe, executive director of the state Democratic Party. That's why a more detailed accounting is needed, he said.

"If there's a problem, it's in the way the funds are transferred to the governor's account," Hauffe said. "You bundle those donations and the donors get lost. There needs to be an itemized accounting of where that money comes from and how it's spent."

That's especially true because personal access can translate into political influence, he said. The potential to exchange dollars for favors is as real in the club as in a state system allowing contributors to the governor to hold no-bid state services contracts, Hauffe said.

"It goes right back to things problem with those no-bids," he said.

And there are state contract holders on the Governor's Club list. They include former state Attorney General Roger Tellinghuisen, a Spearfish lawyer with $75,000 legal services contract; Dr. Michael Rost of Sioux Falls, whose company has about $400,000 in contracts; Tom Adam of Pierre, a partner in a Pierre law firm with a $350,000 in contract; and Sioux Falls lawyer Doug Hajek, a member of the Davenport, Evans, Hurwitz & Smith firm, which holds a $700,000 state contract.

Knudson is with Davenport, Evans, too. But he says the corporate structure is designed so that he doesn't benefit financially from the state contracts.

Maybe so, Hauffe said, but the whole mix of money, personal connections and no-bid contracts is more proof that the public needs more details on how where the money starts, how it flows, and where it ends up.

Contact Kevin Woster at 394-8413 or

Campaign finance reports

While Governor's Club members are not listed by the South Dakota Republican Party, all donors - including qualifying club members who have donated $1,000 or more - are listed in the state's campaign finance reports filed with the Federal Election Commission'smat

Part of the Club

These West River donors to the South Dakota Republican Party qualified for membership in the Governor's Club during 2007-2008, which allowed them access to Gov. Mike Rounds in exchange for their donations.

Adelstein, Stan Rapid City NWE Management Co.

Benson, Judy and Robert Winner Retired

Brown, Gloria Rapid City Hotel owner

Brown, Gary Rapid City Hotel owner

Carpenter, Edward Rapid City Costello, Porter law firm

Dreyer, Melvin Rapid City

Estes, Doug and Justine Rapid City Motel & Casino owner

Estes, Doyle Rapid City Attorney

Fuller, Jacqualyn Lead Public school teacher

Gowen, Mr. & Mrs. Richard Rapid City South Dakota School of Mines

Gregory, Clint Hot Springs Retired

Gustafson, Wayne Rapid City Gustafson Builders

Ham, Arlene Rapid City Retired

Hustead, Mr & Mrs. Rick Wall Wall Drug

Jenson, Mary Jean & Eldon Lemmon Business owner

Lien, Barbara & Charles Rapid City

Moyle, Gilbert III Rapid City Moyle Petroleum

Nelson, Allen Rapid City Bangs McCullen law firm

Peterson, Casey Rapid City Certified public accountant

Rock, Bonnie Hot Springs Retired

Schmidt, Ronald Rapid City Attorney

Shafai, Hani Rapid City Dream Design International

Shoener, Jerry Rapid City Retired

Simunek, Steve Hot Springs Construction

Sohl, Lloyd Rapid City Great Western Bank

Tellinghuisen, Roger Spearfish Attorney

Thom, Kevin Rapid City City of Rapid City/Advisor

Vetterman, Larry Hot Springs Manufacturer

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