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Friday, October 9,2009

Swift boat veteran

A closer look at the “527” account of Lansing Mayor Virg Bernero

by Neal McNamara
Lansing Mayor Virg Bernero is kin to the likes of Swift Boat Veterans for Truth, MoveOn.org, Gov. Jennifer Granholm and even Ingham County Sheriff Gene Wrigglesworth in having his own “527” account — so named for the IRS tax code provision that allows political entities to have an organization into which unlimited donations can be dumped.

Sometimes these accounts can be used for influence, but in Bernero’s case, he says the account is for “functions related to doing the job of mayor.”


It can be used for “having business lunches, things like appreciation of staff, things as simple as sending flowers to a funeral — those are some main examples,” he said.


The 527, called “City Administrative Account,” was set up in 2005 to cover the costs of Bernero’s inauguration. Since then, Bernero has raised almost $200,000 in donations from some of the powerhouses of local business. Tetra Tech, an environmental consulting firm that has done extensive work on the combined sewer overflow project, and is also one of big gest contributors to Bernero’s campaign coffers, has given $18,000. Blue Cross Blue Shield Michigan has given $10,500. A Blues offshoot, the Accident Fund, which is receiving about $115 million in incentives to locate its new headquarters downtown, gave $9,500. Other top donors include ET McKenzie ($6,000), which does CSO work, Malcolm Pirnie ($10,000), which also does CSO work, developer Harry Hepler (Prudden Place) ($5,000), the United Autoworkers Union ($6,000) and Capitol National Bank ($6,000).


Bernero says that he and Denise Sloan, a local political consultant whose company is called Sloan and Associates, do all the fundraising. Sloan is paid out of the 527 fund.


But it’s one donation — $2,500, which is rather small compared to other donations — from the Board of Water and Light that raises the question, “How did taxpayer money end up in the mayor’s political account?” Derek Melot brought this to light in a Lansing State Journal column last week after discovering the 527 while researching such accounts of other Michigan politicians.


Bernero explains it as a typo. He doesn’t remember exactly what happened, but either he, Sloan or Barbara Roberts Mason, who chairs the Lansing Sister Cities Commission, either asked or mentioned the need for the money to BWL to support an Africa Sister Cities conference that was held in August 2008.


BWL has a charitable arm called the Sponsorship Committee, which makes donations to local nonprofits and other causes. Calvin Jones, who heads the committee and is BWL director of governmental relations, recalls getting a request to donate the funds to the city administrative services account— strikingly similar to the name of Bernero’s 527. But Jones didn’t know exactly where the money was going — just that it would support the Sister Cities conference.


“Our intent all along was to sponsor the Sister Cities Commission,” he said.


“There was no indication that this was anything but a city account used to defray costs of the sister cities conference,” BWL spokesman Mark Nixon said.


Bernero does not know of any account in City Hall called “city administrative services.” He thinks it was a typo and they were trying to put the money into the 527 so that it could then be used on Sister Cities, thinking that they were donating the money to the Sister Cities, which is its own separate nonprofit. But the problem with that, Bernero said, is the appearance of BWL ratepayer money in what could be perceived as a slush fund. Last week, he refunded the $2,500.


So, if that money was donated to his account in 2008, it was used for Sister Cities anyway, right? No. Bernero does not know exactly what it was spent on, but it was put into the general pool of the 527. According to the 527 filings with the IRS, expenditures after the date the BWL check was deposited — Aug. 21, 2008 — include travel to Minnesota, Chicago, Colorado and Toronto, and meals at Troppo, Corey’s Restaurant and a payment to C.L. Moore and Associates, which does Bernero’s books.


“It sat there or was used for other purposes,” Bernero said. “It wasn’t diverted to some other specific thing. It probably just sat in the account.”


In fact, in the past, Bernero has spent money from his 527 on the Sister Cities program. In 2006, the 527 paid out just under $600 to cover some expenses for a visit by delegates from Lansing’s South Korean sister city, Asan. The bulk of it was paid for by corporate contributions.


“The Asan trip, when we hosted it here, cost some money,” he said. “The issue is that it’s the appearance of taking ratepayer money and put it into a 527, which is what in many respects people think is a political account. I will continue to support Sister Cities as appropriate out of the 527.”


Correction: An earlier version of this story incorrectly identified the method by which Lansing State Journal columnist Derek Melot discovered the City Administrative Account.


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