Durham campaign investigation hints at 'serious violations'

A $191,000 discrepancy exists between bank records and financial disclosures for Rep. Jeremy Durham's main campaign finance account, according to a memo from the Tennessee Registry of Election Finance that's part of an ongoing state investigation.

Bank records show Durham’s campaign account on March 31 had a balance of $6,857, according to the memo obtained by The Tennessean. But Durham’s first quarter financial disclosure, filed on June 6, states the campaign had $198,254.

“At this time a determination cannot be made as to the accuracy of Rep. Durham’s campaign balance due to investments, failure to report contributions and other transactions,” states the memo, dated Aug. 10.

Drew Rawlins, executive director of the state Bureau of Ethics and Campaign Finance, wouldn’t say whether the state found any illegal acts by Durham, R-Franklin. But Tom Lawless, chairman of the board, said the memo raises questions.

“There are indications there may be some serious violations, and we want to garner the facts so we can take the appropriate remedies,” Lawless said in a telephone interview Tuesday.

The registry, an entity within the state Bureau of Ethics and Campaign Finance, started investigating Durham in June after the Tennessee attorney general provided a signed statement from a former campaign worker accusing Durham of using campaign funds for his private business.

Amy Mohan, an attorney who works with Bill Harbison— who was Durham’s attorney throughout the investigation that revealed allegations of inappropriate sexual conduct toward 22 women — said she "did not have any comment at this time" about the findings in the memo.

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Fairview Mayor Patti Carroll, who served as Durham’s longtime campaign treasurer, said Tuesday she was unfamiliar with the memo and had no knowledge of any investments and loans the Franklin lawmaker had made.

The memo outlines four different types of investments made with campaign funds. They include:

• Investing money from his campaign and political action committee accounts, along with his own money, in a company listed as “Company A.”  

• Creating a $30,000 line of credit for himself from his campaign. The state says records show Durham has received $25,000 and paid back $15,000, with no indication of any interest paid.  

• An apparent $29,800 loan from Durham’s campaign to “individual B.” The arrangement, outlined in an “unsigned promissory note,” was supposed to be for $23,800, including a 10 percent interest rate if the loan wasn’t paid back by Feb. 1. Durham’s campaign wrote three checks in the fall of 2015 totaling $29,800 to “individual B” but no records indicate whether the loans have been repaid.

• In December 2014, Durham’s campaign sent a $10,000 check to “company C” as an “investment.” The memo states there is “no documentation” for this money.

Durham Bureau of Ethics and Campaign Finance Memo

Those investments were all made with campaign funds, according to the memo. None of the transactions are listed on Durham’s campaign finance disclosures.

In June, Rawlins said it is illegal to use campaign funds for personal purposes. On Tuesday, he said said it is not illegal for a candidate to transfer funds from a campaign checking account to a savings account, which would be considered an investment.

“If additional information comes to light, we would be making a referral to the district attorney, and that intent was expressed to the executive director,” Lawless said.

Rawlins declined to identify any of the people or companies referenced in the memo. He said he didn't know whether Durham had a personal stake in any of the companies.

The memo also states Durham received roughly $10,000 in unitemized contributions — contributions of $100 or more — that “appear to have not been reported.” Campaign finance law requires detailed reporting of all monetary contributions of more than $100, including the name, address and occupation of the person making the contribution.

Documentation is also missing for a $7,500 check that was cashed in January, the memo states. It doesn’t make clear whether the check went to Durham or if the money was spent by Durham’s campaign.

The campaign finance investigation stems from an allegation by Benton Smith, a former campaign and legislative aide to Durham. Smith told the attorney general that Durham asked him take $2,000 from the campaign and deposit the money into Durham’s private title company, called Battleground Title and Escrow.

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At the time, Durham denied any wrongdoing, blasting Smith as a disgruntled former employee and disputed moving money between his campaign and his title company. He said bank records would prove no campaign money went from his campaign to his company, but declined to provide those records to The Tennessean.

Durham’s campaign finance reports show a $2,000 payment to Smith in May 2015, and that amount is taken out of the campaign’s ending balance listed in the report. But the memo states the expenditure “appears to have not been paid directly from Rep. Durham’s campaign account based on the records we have been provided.”

It was unclear how an expenditure from the campaign may not directly come from the campaign account.

In June, Rawlins said the board would subpoena Durham’s personal bank records, his campaign accounts and his business bank accounts.

The August update came as a result of records Durham supplied Rawlins’ office. Durham provided bank statements, canceled checks and credit card statements but not receipts or invoices for his expenditures.

Candidates are required to keep copies of all checks, bank statements and vendor receipts for two years after the appropriate election, according to campaign finance guidelines.

Carroll served as Durham’s treasurer from 2015 until July, when Durham suspended his re-election campaign. Carroll said Tuesday she had little knowledge about the campaign finance dealings under investigation by the state.

“He’s never spoken to me about loaning money to individuals,” she said, adding that she had not been subpoenaed.

In mid-July, Attorney General Herbert Slatery released a scathing reporting detailing multiple allegations against the 32-year-old, including having sex with a 20-year-old female college student in his legislative office and at his home.

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Durham denied any of the sexual allegations in the report but said some interactions were true. The day after the report was released, he suspended his re-election campaign. GOP challenger Sam Whitson crushed Durham in the primary election, but Durham remains a lawmaker until the start of the next legislative session. Whitson faces Democrat Holly McCall in the November election.

The scrutiny over his campaign finances comes more than a decade after Durham faced questions about exceeding campaign spending limits while he was running for student government in college. Durham told the school paper in 2005 an accounting error made it look like there were excess donations.

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Rawlins said it’s unclear how long the investigation into Durham’s expenses will last but that he is still awaiting campaign bank records that have been subpoenaed.

“We have told him to keep this on the front burner,” Lawless said.

Reach Dave Boucher at 615-259-8892 and on Twitter @Dave_Boucher1. Reach Joel Ebert at 615-772-1681 and on Twitter @joelebert29.