Duncan spends campaign funds freely on family

For U.S. Rep. John J. “Jimmy” Duncan Jr., keeping it all in the family includes his campaign funds.

Over the past decade, Duncan has doled out hundreds of thousands of dollars to his two sons, his niece, his son-in-law, his daughter-in-law and his sister for campaign work, raising both ethical and legal questions for the senior statesman. In fact, the only non-family member paid a regular salary for campaign work in recent years has been Duncan’s chief of staff, Bob Griffitts, who receives $500 monthly for work outside his legislative duties (a regular occurrence in D.C.)

The Federal Election Commission candidate guide states, “Campaign funds may be used to make salary payments to members of the candidate’s family only if: The family member is providing a bona fide [emphasis theirs] service to the campaign; and [t]he payments reflect the fair market value of those services.”

Watchdogs and political staffers say both of those provisions appear to be at issue with some of Duncan’s expenses, most notably with payments he has been making to his son John J. Duncan III since 2013. But payments to Duncan’s other family members also raise questions as to how much one family is profiting from its long-term grip on a congressional seat.

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Duncan’s father, John James Duncan Sr., was elected to represent Tennessee’s 2nd Congressional District in 1964, after serving as the mayor of Knoxville for five years. He won his first race by just under 10 points, but he never again faced serious opposition, either in a primary or the general election.

Duncan Sr. died during his 12th term in office in 1988. Jimmy Duncan ran to replace him, was elected, and has represented the district ever since. Now 69, Duncan has still not said whether he will run for a 16th term in Congress next year. But he has continued paying his family members for campaign work all the same.

In the fall of 2010, all signs pointed to John Duncan III continuing in his namesakes’ footsteps. The younger Duncan had just been elected Knox County Trustee, and chatter was that after two terms in office, his father would retire and he’d run for the seat in 2018 or 2020 — that is, if he didn’t first decide to run for another office in the city or county on his way to Congress.

But things didn’t work out that way. First there was a bitter divorce from his college sweetheart, complete with salacious allegations and rumors. Then there was the federal investigation into his management of the Trustee office — charges that included paying employees and himself $42,000 in bonuses for certification classes they never took.

John Duncan III resigned from office on July 2, 2013, when he pleaded guilty to felony official misconduct. (Everyone involved also resigned.) He received a year of probation for his cooperation with the investigation. He has since been granted judicial diversion and had the charges expunged from his record. And he has since remarried; he and his wife adopted twins in 2015.

Two weeks after that plea, on July 15, 2013, Rep. Duncan began paying his son a $3,000 bimonthly salary from his federal campaign account. A year later, in August 2014, the payments increased to $3,500 every other week — $84,000 annually.

That’s more than all but two of Rep. Duncan’s staffers in Washington make.

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If you look at the FEC filings, you won’t see any salary payments made out to John Duncan III after 2013. That’s because since November 2013, the younger Duncan has been getting paid under the aegis of “American Public Strategies.”

However, no business entity named American Public Strategies is registered with the state. The address for payments to the entity has been consistent with Rep. Duncan’s two campaign offices during the past four years, and currently payments are addressed to a house on Nubbin Ridge Road in Knoxville — the only house owned by the younger Duncan.

Nubbin Ridge Road is outside of Knoxville city limits, but both campaign office addresses are in the city. Yet American Public Strategies has never registered for a business license with the city of Knoxville. It was issued a Knox County business license in 2013, but that license expired in the summer of 2014 and has not been renewed since.

According to the Tennessee Department of Revenue, a person needs to get city and county business licenses and pay state business taxes if “an individual is 1) acting as a business (sole practitioner) and not as someone’s employee, 2) is conducting taxable activity, and 3) earns more than $10,000 for the services performed.”

Department of Revenue spokesperson Kelly Cortesi said it’s unclear whether the younger Duncan working for his father’s campaign as a business entity would fall into this category.

“Based on the facts included in your question, it is impossible to surmise whether or not that particular person is compliant,” Cortesi emailed. The department does not share information as to whether taxes have been paid or not, and the younger Duncan did not respond to questions about American Public Strategies’ business structure or lack thereof.

Still, since 2013, Rep. Duncan has paid his son $316,500 in salary alone. The campaign also pays for his son’s cellphone and reimburses his mileage, many meals and multiple other expenses.

Yet Rep. Duncan did not face any primary challenger in 2016. He had one in 2014, now state Rep. Jason Zachary. The congressman won by 21 points — the closest race he had faced in years. In 2012, facing two primary challengers, Rep. Duncan walked away with 83 percent of the vote. He did not face a primary challenger in 2010 or 2008. In 2006, he won 87 percent of the primary vote, and in 2004, 92 percent. The only serious Democrat contender Rep. Duncan has ever faced was in his first race in 1988. And even though it is 2017, the congressman has never bothered to create a campaign website.

“I would ask, is [John Duncan III] actually providing bona fide services?” said Brendan Fischer, the director of federal and FEC reform for the Campaign Legal Center, a nonpartisan and nonprofit election law organization. “If so, what are they? And is [his salary] fair market value? If it goes above fair market value then you are in violation of the law.”

One former Republican campaign staffer (who has never worked for Rep. Duncan) suggested the salary is well above fair market value.

“It’s not unusual for candidates to hire family members to do limited campaign work. It is an appearance that you generally want to avoid, but sometimes you have family members who can benefit a campaign because of their specific skillsets,” said the former staffer, who asked to remain anonymous. “But what raises flags for me is the exorbitant amount of money involved — his salary is higher than most campaign managers are paid for congressional races.”

Several other people who have worked on other candidates’ campaigns — none agreed to be quoted for fear of reprisals from powerful Duncan supporters — also indicated the salary was incredibly high, especially for a safe district like Rep. Duncan’s.

But the younger Duncan claims he is earning his keep.

“I’ve had numerous duties including, but not limited to, running the campaign, fundraising, coordinating volunteers, organizing events, representing my Dad at various community events and functions, meeting with constituents on his behalf, writing statements on issues — both politically and policy related, researching policy, advising my Dad on issues, conducting polling, delivering speeches, writing letters to constituents, coordinating radio, television and direct mail advertising, and handling politically related correspondence that comes into both the Knoxville and Washington offices,” John Duncan said, describing his job duties in an email.

Yet that list raises even more questions, as John Duncan III seems to be describing much of his work as duties generally befalling a legislative staffer, not a campaign employee.

“I would characterize that as an uncomfortable blending of lines of political and policy arms for Congressman Duncan,” commented the former campaign staffer, citing the possibility of questions about Hatch Act violations.

What is also unclear is how many hours a week the younger Duncan is spending on the alleged campaign work. Fischer said that under best practices, the son would have a contract with his father spelling out the specific duties he is doing for the appointed salary; John Duncan III did not respond to a request for comment as to whether he has one.

However, the younger Duncan has also been working as a licensed Realtor since last year. The realty education firm McKissock confirmed John Duncan III completed 90 hours of training in May 2016 to qualify for his state license, which was issued Aug. 26, 2016.

On May 25 of this year, the younger Duncan posted on Facebook, “Ever since college, whether it was through banking, consulting, or government, I’ve been involved in various aspects of real estate. A while back, I actually got my real estate license so that I could help some friends and family members buy and sell houses. That quickly turned into me partnering up with longtime Realtor Doyle Webb to work with home builders on new construction projects, as well as helping different buyers and sellers in the area. … During my time in real estate, I’ve worked as hard as I can to be a different kind of agent, who operates with professionalism and sincerely puts my clients’ goals ahead of my own. I’m now working with Doyle, Glenn Jacobs, and Crystal Maurisa Jacobs at the brand new EXIT Realty office in West Knoxville.”

Glenn Jacobs is a former professional wrestler who transitioned into insurance sales (and now real estate) in his retirement. He is currently running for Knox County Mayor.

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Rep. Duncan’s son-in-law, Jason Brown, also works in real estate as a commercial broker for Schaad Brown. Brown is also paid by the congressman’s campaign — $350 each month since May 2011 to serve as the campaign treasurer on the account. However, he’s benefiting from the campaign in another way — he partially owns the building the campaign office is leasing.

Prior to 2013, when John Duncan III started working for his father, the only rent expenses incurred by the campaign were a $390 annual storage unit fee and prior to that a monthly $65 storage unit fee. (The younger Duncan claims there were previous campaign offices, but FEC filings do not back that up; people close to past campaigns also say there was never an office, or at least not since his early years in Congress.)

In September 2013, the campaign began to pay $600 a month to Keenland Heights for a suite in an office park on Center Park Drive in Knoxville. That office park is leased by Schaad Brown. In 2014 the campaign moved to a suite in a Kingston Pike building also leased by Schaad Brown. Rent stayed the same at $600, which the campaign continues to currently pay.

That office building, 6906 Kingston Pike, is owned by Sage Investment Co. — the only property it owns in the county. No such entity has registered with the state, the city or the county. However, the P.O. box for Sage Investment is the same as that of JMB Investment LLC and Broadway Investment Co. LLC, two registered entities. According to filings with the state, JMB Investment consists of the four men at Schaad Brown — Michael Schaad, Jason Brown, his father Gene Brown and brother Brian Brown — while Broadway Investment is Schaad and Brian Brown.

Jason Brown refused to answer questions via phone or text message as to who is involved in Sage Investment, only stating in a text message, “Congressman Duncan has no ownership or financial interest in that company.” But when asked if any family members other than Brown are involved in Sage Investment, John Duncan III replied, “No,” confirming his brother-in-law’s interest in the property.

It’s also unclear what, if anything, the office is used for, other than storing campaign signs. A recent visitor to the building could find no sign of an office for Rep. Duncan’s campaign after walking around and noted that the building directory lists only a blank line beside the suite number that is supposed to house the campaign. The congressman’s official Knoxville office also had no idea a campaign office was operating.

“He doesn’t have an office set up right now, because it’s not campaign season,” a staffer said when asked for the location.

John Duncan III said the staffer probably didn’t know about the office “because the staff is never asked to perform campaign work or political duties.”

“The campaign does currently have an office open at this location, which is staffed and also houses all campaign materials,” John Duncan said. “The office isn't advertised with signage except for during the final months before the election. However, with two year terms in Congress, the campaign never ends.”

But if the younger Duncan is also regularly spending time at his new real estate office, it’s not clear who would be staffing the campaign office — John Duncan III is the only person being paid with campaign funds who lives in Knoxville.  

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Another family member getting paid by Rep. Duncan is Courtney Massey Kohlhepp, his niece and the daughter of state Sen. Becky Duncan Massey, the congressman’s sister. Kohlhepp has been paid $750 per month since June 2011 — $9,000 a year — ostensibly to manage the campaign’s bookkeeping. She currently lives in Austin, Texas, and works for a gymnastics studio; she has also taught dance, in which she majored during college.

Massey was paid $500 per month in 2010 and 2011 — a total of 12 payments — for doing the same work. Prior to that the campaign paid $240 a month to a staffer named Elaine King for the work.

A 2012 Knoxville News Sentinel story quotes Rep. Duncan’s then-spokesperson, Patrick Newton, as saying Massey prepared the files for her father when he was in Congress and continued charging the same rate to her brother; however, FEC filings available online do not show Massey being paid a salary from her brother’s campaign funds prior to 2010.

“If Becky and Courtney didn’t do those reports for him, he’d have to hire an attorney or CPA in D.C. to do it, and it would cost much more money than what they charge,” Newton told the newspaper.

But Kohlhepp was the fourth-highest paid vendor during Rep. Duncan’s 2015-2016 campaign cycle. (John Duncan III was the highest paid by far, and Sage Investment ranked seventh.)

“For a person that is not actually trained in accounting to be paid that much to file quarterly reports does raise questions,” Fischer of the Campaign Legal Center said.

In the 2013-14 cycle, John Duncan III was the second-highest paid vendor, behind public relations and marketing firm Moxley-Carmichael, but ahead all other advertising vendors.

For what it’s worth, Massey has also paid her daughter a total of $10,800 for campaign work from state campaign funds since first running for office in 2011.

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Rep. Duncan has also been paying family members to run his leadership political action committee, the Road to Victory PAC. John Duncan III was paid $500 monthly to “administer” the PAC from 2006 until January 2011; his payment increased to $625 in the middle of 2010. A Washington, D.C.-based attorney, Christopher Hogin, was paid $250 to serve as the PAC’s campaign treasurer during that same time period.

An audit in 2015 found an aggregation of unreported contributions and disbursements from prior to January 2009 through early 2011, which resulted in a $37,723.93 “cash correction” for the account. Only $7,500 of those corrected funds were later itemized. Around the same time as the financial mishandlings in 2011, Rep. Duncan’s other son, Zane Duncan, became the PAC’s campaign treasurer, taking over from both his brother and Hogin at $625 per month to handle all the PAC’s administrative and financial duties.

In January 2016, Zane Duncan was appointed to the state board of parole, with its $95,000 salary, despite having zero background in legal issues or criminal justice and a college major in kinesiology. (U.S. Rep. David Kustoff’s wife Roberta, a lawyer, also serves on the board; she was appointed before he ran for Congress.) At that time, Zane’s wife Hallie Duncan became the PAC’s treasurer; she is also paid $625 monthly.

In recent years the PAC has paid more to Zane and Hallie Duncan than it has donated to other candidates. In each two year cycle since 2011, the couple has received $15,000 for administering the PAC’s finances. But during the 2011-12 cycle, the PAC only donated $3,000 ($2,000 of which was to Massey’s state Senate campaign). In 2013-14, the PAC donated $10,000, and in 2015-16, it donated $7,750. And in 2009-10, when John Duncan III was still in charge, the PAC donated $1,750 to federal candidates — and $5,000 to his own campaign for trustee. He was paid $13,250 by the PAC that year.

Meanwhile, Zane Duncan was twice paid by his father’s campaign while he was still being paid by the PAC. In October 2012, he was paid $4,500 and in January 2015 he was paid $2,500. (He was also paid $2,100 in 2010 for campaign work.) John Duncan III says that despite this overlap, there was no coordination between the campaign and the PAC.

Zane Duncan has also occasionally been reimbursed for mileage, travel and dining expenses over the years from the campaign account, including $535 this past February, three months after the election. His brother said the reimbursement was because Zane Duncan “attended functions and helped host constituents at the Inauguration in Washington.” Zane Duncan also purchased $764.73 in computer equipment for the PAC in November 2013. Hallie Duncan spent $1,036.78 on computer equipment for the PAC in May 2016.

Fischer says the election laws regarding payments to family are looser regarding PACs.

“It’s concerning, but it may not trigger same concerns about personal use,” Fischer says. “But it’s potentially an indication that this is standard operating procedure, to pay family members for work. It could be seen as further evidence that there’s a pattern of using campaign funds to support his children.”

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There are other questions about Rep. Duncan’s campaign finances — tens of thousands of dollars of unitemized American Express payments, along with itemized, possibly excessive dining and gift expenses — but those are harder to categorize as definitively problematic without an audit. What is clear, however, is that under the management of his son, the congressman’s campaign funds are going out much more quickly than they’re coming in.

If Rep. Duncan decides to retire next year, no problem. He’ll have just under $1 million to donate to other races or to his namesake law school. But if he does run again — and will likely face Knox County Mayor Tim Burchett, a hard-working younger candidate who has been campaigning constantly since his 20s — he’s apt to face even more questions. Constituents and donors may finally decide that 54 years of all in the Duncan family is enough.